Business News

Household debt is on a rising trend with the super prime borrowers borrowing to create assets and the subprime borrowers borrowing for consumption purposes. But dispelling concerns about a built up in bubble , the Reserve Bank of India said that the increase is driven by a growing number of borrowers rather than an increase in average indebtedness in its latest financial stability report released on Monday.At 42.9 percent of the country’s gross domestic product at current market prices in June 2024, India’s household debt is relatively low compared to other emerging market economies. “However, it has increased over the past three years. Even as household debt is on a rising trend, the increase is driven by a growing number of borrowers rather than an increase in average indebtedness” the central bank said.A disaggregated analysis of the nature of individuals’ borrowings shows that loans are primarily used for consumption (personal loans, credit cards, consumer durable loans and other personal loans), asset creation (mortgage loans and vehicle loans and two-wheeler loans) and for productive purposes (agriculture loans, business loans and education loans), according to the report.Borrower-type analysis revealed that subprime borrowers availed loans primarily for consumption purpose, whereas super-prime borrowers used debt for asset creation, especially housing.But the trend may not be worrisome because per capita debt of individual borrowers has increased sharply for super-prime borrowers in the recent period, while it has remained stable for other risk tiers. “ From a debt-servicing capacity perspective, the rise in per capita debt only among highly rated borrowers and use of debt for asset creation are credit positive and financial stability enhancing” the report said.The central bank’s assessment of the quality of Indian household debt assumes significance in the backdrop of a sharp rise in retail borrowings in the banking sector raising asset quality concerns if repayment is hit because of over borrowing and income loss. The Reserve Bank, it may be recalled had imposed higher risk weights on certain retail loans like credit card outstandings and unsecured loans to rein in such lendings by banks and NBFCs.

Electric scooter maker Ather Energy has received approval from the Securities and Exchange Board of India (Sebi) to launch its initial public offering (IPO).The Bengaluru-based company will become the second EV manufacturer in India to go public, following Bhavish Aggarwal-led Ola Electric.The proposed IPO includes a fresh issue of equity shares worth up to Rs 3,100 crore and an offer for sale (OFS) of up to 2.2 crore equity shares by existing shareholders, according to the draft red herring prospectus (DRHP) filed with the regulator in September.The selling shareholders include founders Tarun Sanjay Mehta and Swapnil Babanlal Jain, each offering up to 10 lakh equity shares. Corporate shareholders offloading their stakes are Singapore’s sovereign wealth fund GIC, National Investment and Infrastructure Fund II (NIIF-II), Internet Fund III, 3State Ventures, IITM Incubation Cell, and IITMS Rural Technology and Business Incubator.Individual shareholders Amit Bhatia and Karandeep Singh are also participating in the OFS. Hero MotoCorp, which holds around a 37.2% stake in Ather, will not sell any shares in the IPO.Ather Energy ranks as India’s fourth-largest electric two-wheeler maker by sales volume, trailing Ola Electric, TVS Motor, and Bajaj Auto. In 2024, the company sold around 1,25,569 vehicles, according to data from the government-run Vahan portal.The Hero MotoCorp-backed company has set a valuation target of $2-2.25 billion for the IPO, as reported by ET on September 6.It last raised Rs 600 crore ($71 million) in funding from the NIIF, cruising it into the unicorn club. As reported by ET on August 13, the company had been valued at $1.3 billion, or about Rs 10,900 crore.In June, Ather Energy transitioned into a public limited company as part of its IPO preparations. Despite this, the company’s financials reflect challenges. Its losses widened by over 22% to Rs 1,059 crore in fiscal 2024, while its revenue remained flat at Rs 1,753 crore.As mentioned in the DRHP, Ather plans to utilise the net proceeds from the fresh issue for multiple purposes, including funding capital expenditure to establish an electric two-wheeler (E2W) factory in Maharashtra, investments in research and development (R&D), repayment or prepayment of certain borrowings, marketing initiatives, and general corporate purposes.Founded in 2013, Ather Energy designs and develops electric two-wheelers, battery packs, charging infrastructure, associated software, and accessories. The company also manufactures battery packs and assembles its E2Ws in-house.Ather’s product portfolio includes two lines: the Ather 450 and the Ather Rizta, comprising a total of seven variants.Axis Capital, HSBC Securities and Capital Markets (India) Pvt Ltd, JM Financial, and Nomura Financial Advisory and Securities (India) Pvt Ltd are the book-running lead managers for the issue.