ATC Energies System Limited, a prominent player in the lithium-ion battery manufacturing industry, had a disappointing debut on the National Stock Exchange (NSE) SME platform on April 2, 2025. The company’s shares, which were issued at a price band of ₹111 to ₹118, opened at ₹107, significantly below its issue price. Following this weak opening, the stock quickly hit the 5% lower circuit limit, dropping to ₹101.6. At this price, the company's market capitalization stood at ₹207.25 crore, highlighting investor concerns regarding the performance of this battery manufacturing company post-IPO.

ATC Energies System IPO Subscription Details

The IPO, which raised ₹63.76 crore, consisted of a fresh issue of 43.23 lakh shares worth ₹51.01 crore and an offer for sale (OFS) of 10.80 lakh shares, amounting to ₹12.74 crore. Despite the weak listing performance, the IPO had been subscribed 1.58 times by the end of its subscription period on March 27, 2025.

The grey market premium (GMP) of the IPO had been ₹0, reflecting the lack of investor enthusiasm or demand ahead of the listing. The issue price of ₹118 was expected to lead to a market capitalization of ₹240.58 crore if the stock performed well on its listing day, but it failed to meet those expectations, leading to the immediate circuit breaker.

Market Reaction and Performance

The significant drop on listing day has raised concerns among investors and analysts about the demand for ATC Energies System's shares. The market sentiment surrounding the company appears to be lukewarm, especially in light of the company's reliance on Chinese imports for its raw materials, such as lithium, cobalt, and nickel, which have seen price volatility.

Company Overview

ATC Energies System Limited, based in India, manufactures lithium-ion batteries for various applications, including automobiles, banking, and industrial sectors. The company has expanded its product portfolio from mini batteries for ATMs to large batteries for electric vehicles (EVs) and renewable energy storage.

The company operates from factories in Noida, Vasai, and Thane, with a production capacity that ranks among the top 10 brands in Asia. The firm’s 85-90% reliance on imported raw materials, particularly from China, exposes it to international supply chain risks and fluctuations in commodity prices. However, it continues to focus on expanding its capacity and enhancing its technological infrastructure, which are key elements in its future growth strategy.

The Lithium-Ion Battery Industry

The global lithium-ion battery market is seeing rapid expansion, driven by increasing demand in sectors like electric vehicles (EVs), renewable energy storage, and consumer electronics. The Indian market, in particular, has shown significant growth, with expectations of it reaching $6 billion by 2026 and $15 billion by 2030.

ATC Energies System, positioned in this high-growth sector, aims to tap into these expanding markets with its diversified product range. However, it faces stiff competition from both domestic and international players, especially in the EV and renewable energy sectors.

IPO Objectives and Use of Proceeds

The funds raised from the IPO are intended to be utilized for several purposes:

1. Debt Repayment: ₹952.83 lakhs will go toward repaying loans related to the purchase of ATC’s Noida factory and its land.

2. Capital Expenditure: ₹672.16 lakhs will be allocated to refurbishing and upgrading the Noida factory.

3. IT Upgradation: ₹746.88 lakhs will fund IT upgrades at the company's factories and registered office.

4. Working Capital: ₹950.00 lakhs will be used to support the company’s working capital requirements.

5. General Corporate Purposes: The remaining funds will be used for various general corporate expenses.

Business Risks and Market Challenges

Despite its promising product offerings, ATC Energies System faces several risks that could affect its future growth:

• Supply Chain Vulnerability: The company's heavy reliance on raw materials imported from China poses a risk due to potential trade disputes, supply disruptions, and price volatility.

• Customer Concentration Risk: A significant portion of the company’s revenue comes from a few key clients, including promoter-group entities. Any reduction in orders from these clients could destabilize its revenue stream.

• Banking Sector Dependence: The company's dependence on the banking industry for a large share of its revenue exposes it to fluctuations in this sector.

Conclusion

ATC Energies System’s IPO debut reflects a significant mismatch between investor expectations and market realities. The company’s reliance on imported materials, combined with its concentrated customer base and uncertain market conditions, poses challenges to its long-term growth trajectory. Investors may want to closely monitor the company's performance post-listing and assess its ability to overcome these challenges in an increasingly competitive battery manufacturing sector.

As the lithium-ion battery market continues to grow, ATC Energies System’s ability to innovate and diversify its offerings will be critical in ensuring its success in the future. However, for now, the weak debut on the NSE SME platform leaves many uncertainties surrounding its immediate prospects.

The Current active IPO are Infonative Solutions Limited,Spinaroo Commercial Limited,Retaggio Industries Limited.

The Closed IPOs are  Identixweb Limited, ATC Energies System Limited, Shri Ahimsa Naturals Limited.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in .Choice Broking FinX

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.