Altigreen chugs towards profitability following December restructuring

That, however, might be a long and bumpy road.

As part of a restructuring in December after the company failed to raise funds last year, Altigreen laid off about 200 employees and cut salaries by 30-40% to pare expenses, two people familiar with its operations told Mint, requesting anonymity.

But sales remain a challenge for the maker of electric three-wheelers, they said. Besides, in the 2022-23 financial year, the latest for which data is available, Altigreen’s losses widened significantly, to ₹78 crore from ₹22 crore in the year before, according to data sourced from Tofler.

Amitabh Saran, co-founder and chief executive, however, insists that the company’s cost-cutting measures have started bearing fruit.

“Investors in 2024 have been evaluating business plans on the basis of a clear path to profitability of companies,” he said. “Altigreen’s bet, taken in September, to focus on profitability (rather than market share), is reaping dividends.”

Altigreen has raised a total funding of $39 million, or about ₹300 crore, so far from investors including Reliance New Energy, Sixth Sense Ventures, Xponentia Capital Partners, Momentum Venture Capital, and Accurant International.

Operational challenges

Altigreen has been experiencing significant challenges in selling its products due to lack of demand, said the people familiar with the company’s operations.

“In the middle of last year, they were expecting the funding round to happen and all the teams were asked what resources are needed for manufacturing 1,000 vehicles. The company has been struggling with demand. There were no orders coming, so we were only manufacturing 100-200 scooters in a month,” said one of these people, a former employee of the company.

Altigreen sold 146 vehicles in 2021, 861 in 2022, and 2,519 in 2023, according to data available on Vahan. To put this in perspective, Altigreen’s 300,000-sq.ft. plant and warehouse facility in Malur, Karnataka, has a capacity for manufacturing 55,000 three-wheeled cargo vehicles a year, according to information available on its website.

India’s electric three-wheeler market size reached $1,031.0 million in 2023, according to research platform IMARC group.

Saran said the company’s increasing revenue—to ₹95 crore in FY23 from ₹8 crore in the year prior—and improving margins following the restructuring will drive profitability.

“We started this year with a negative (-3%) margin and have steadily moved to a positive (+16%) margin. Our determined efforts continue as we aim to reach a (+29%) margin by 2025.”

Restructuring and optimization

Saran did not comment on the number of people laid off or the quantum of pay cut following the restructuring.

“Changes in the team are continuous, gradual, and with a determination to reach a stronger, long-term sustainable position,” he said in an email response to Mint’s queries.

“The automobile industry is unlike the tech or software world where investor capital can be burnt for short-term market share gains, while the company seeks valuation multipliers,” he said. “Burning investor capital is not the way I run companies. Given FAME subsidy continuation uncertainties, the company began its focus on profitability and building margins for the ‘no subsidy’ day, which is coming sooner than we think.”

This included a focus on new product launches, closer supplier partnerships and alliances with battery manufacturers, charging infrastructure providers, and vehicle financing providers, Saran said.

Altigreen recently launched two new models, including an electric three-wheeler for passengers. Overall, the company sells seven models of electric three-wheelers.

Funding struggles

The company has struggled to raise the next funding round amid a slowdown in the larger industry, as investors have become cautious due to external headwinds, said multiple people familiar with the matter.

For instance, last year, the company’s plan to raise capital fell through.

Bloomberg in May 2023 had reported that the EV maker was looking to raise $85 million to ramp up its production. Saran had then confirmed to the publication that the startup was looking to close the round by July.

These include uncertainty around the Faster Adoption and Manufacturing of Electric Vehicles (FAME) subsidy, unfavourable pricing of cells last year, and delays in government decisions, such as scrapping mandatory testing parameters introduced in 2022.

These factors led to poor sales and delays in the launch of new models across the industry.

Investor sentiment took a hit in 2023 but is improving now that it is clear subsidies will gradually shrink, said Saran. He noted that 2022 was plagued with semiconductor issues and 2023 with regulatory changes, including in batteries.

“We raised approximately ₹300 crore in March 2022 – enough for our scale of companies. The funding climate has its own cycles, and it is difficult to predict global sentiments. Knowing this, startups have to be nimble and plan way ahead (which includes raising funds when you don’t necessarily need them),” he said.

The startup had raised Series A funding of ₹300 crore in a round led by Sixth Sense Ventures, which also saw participation from Reliance New Energy, a wholly-owned subsidiary of Reliance Industries Ltd, in 2022.

Altigreen has raised a total funding of $39 million so far from investors like Reliance, Sixth Sense Ventures, Xponentia Capital Partners, Momentum Venture Capital, and Accurant International, among others.

On the company’s fundraise plans, Saran said, “We are in constant fund raise mode, and every day is better than the one gone by.”

“Altigreen uses an engineering-first approach and is probably the only EV company that designs, develops, and manufactures all its EV components ourselves, in our plants, using our own proprietary technologies. We have 32 global patents granted to us. Availability of funds is about fiscal management. A startup will try many things in parallel, but should know when and where to focus on, for long-term sustainable growth,” he added.