Hero Motors, a prominent arm of the Hero Motors Company (HMC) Group, has filed its DRHP with the Securities and Exchange Board of India (SEBI), signalling its intent to raise funds through an IPO. The proposed issue marks a significant milestone for the company as it accelerates its transformation into a global leader in electric and performance powertrain solutions.
Hero Motors IPO comprises a fresh issue of equity shares aggregating up to INR 800 crore, alongside an OFS of shares worth INR 400 crore, bringing the total offer size to INR 1,200 crore.
Hero Motors IPO: Promoters and Selling Shareholders
The promoters of Hero Motors include Pankaj Munjal, Charu Munjal, Abhishek Munjal, and O.P. Munjal Holdings. Notably, O P Munjal Holdings, the largest selling shareholder in the OFS, is offloading shares worth up to INR 390 crore.
Other sellers include Bhagyoday Investments and Hero Cycles, contributing INR 5 crore each to the OFS. The IPO will be managed by ICICI Securities, DAM Capital Advisors, and JM Financial, with KFin Technologies acting as the registrar.
Utilisation of Funds
The company plans to deploy the net proceeds from the fresh issue as follows:
- INR 285 crore for repayment/prepayment of certain borrowings.
- INR 237 crore towards capital expenditure for capacity expansion at the Gautam Buddha Nagar facility.
- The remaining proceeds are earmarked for inorganic growth opportunities, strategic acquisitions, and general corporate purposes.
Business Overview: Integrated Global Powertrain Innovator
Hero Motors positions itself as one of India’s leading powertrain technology companies with a diversified product portfolio spanning electric drive units (EDUs), CVT hubs, gearboxes, motors, and alloy components. Its vertically integrated model supports a complete value chain from design to high-volume production.
The company operates across six facilities globally, including manufacturing plants in India (Uttar Pradesh, Ludhiana), Thailand (Samut Prakan), and a design centre in the United Kingdom (Maidenhead).
Key Customers and Global Footprint
Hero Motors has cultivated a high-profile global client base, including BMW AG, Ducati, Formula Motorsport, Enviolo, Hummingbird EV, and HWA AG. The company is the exclusive supplier for several BMW programs and maintains decade-long relationships with its top five clients, contributing over 60% of revenue.
Revenue from international markets—Europe (29.33%), USA (7.7%), and ASEAN regions—accounted for nearly 40% of its top line in FY24, with India remaining the dominant contributor at 58.72%.
Financial Performance: Moderate Growth Amid Heavy Investment
| Metric | FY22 | FY23 | FY24 | 9M FY25 |
|---|---|---|---|---|
| Revenue from Operations | 914.19 | 1,054.62 | 1,064.39 | 807.27 |
| Adjusted EBITDA | 102.19 | 110.70 | 122.27 | 86.49 |
| EBITDA Margin (%) | 11.18% | 10.50% | 11.49% | 10.71% |
| Net Profit (PAT) | 99.02 | 40.51 | 17.04 | 22.39 |
| Net Profit Margin (%) | 10.83% | 3.84% | 1.60% | 2.77% |
Cash flow from operations remained healthy at INR 128.5 crore in FY24, but heavy investments in capex and acquisitions drove negative investing cash flow of INR 76.93 crore, while financing cash flows turned negative due to repayments and lease liabilities.
Segmental Analysis: Powertrain on the Rise
Hero Motors’ business is divided into two primary segments:
- Powertrain Solutions (Gears & Transmissions + Bike Powertrain):
- Contributed 48.88% of FY24 revenue
- Includes EV-focused sub-segments such as EDUs, CVTs, and electric motors
- EV segment contributed INR 128.09 crore in FY24 (~12.03% of revenue)
- Alloys and Metallics (A&M):
- Traditionally stronger contributor at 51.12%
- Supplies structural auto components like swing arms, chain cases, etc.
The company’s EV business, despite showing a dip in FY24 due to European e-bike inventory overhang, is expected to rebound given the underlying industry growth.
EV Opportunity and Market Position
Hero Motors has been a pioneer in e-bike CVT solutions, being the only Indian exporter of CVT hubs to global OEMs. The firm is leveraging its JV with Yamaha Motors Japan (HYM brand) to produce high-torque electric motors and is expanding into integrated EDU solutions under its proprietary ‘ESYNC’ brand.
The global e-bike industry is projected to grow at a CAGR of 13%–15% to reach 14–18 million units by 2029, while CVT hub demand is expected to skyrocket at 35%–40% CAGR. This positions Hero Motors strongly to capitalise on the shift towards micro-mobility.
Additionally, its strategic acquisitions, notably of Hewland Engineering (UK) in 2022–23, have boosted its design, simulation, and prototyping capabilities, particularly in performance EVs and motorsports.
Risks and Challenges
Despite promising growth, certain red flags deserve attention:
- High customer concentration: Top 10 clients contributed over 76% of FY24 revenue.
- Rising leverage: Net debt to EBITDA rose to 3.45x (not annualised) as of Dec 2024, suggesting growing financial leverage.
- Capital intensity: Fixed asset turnover declined from 4.69 in FY22 to 1.48 in 9MFY25, indicating underutilised investments.
Leadership and Governance
Chairman Pankaj Munjal, a stalwart of the Hero Group, leads the company with over three decades of experience. CEO Amit Gupta, a Harvard alumnus and ISB graduate, has steered the company’s EV pivot since 2004. The board includes names like Andrew Palmer (former CEO, Aston Martin) and Jyoti Arora, former IAS officer, reflecting robust corporate governance.
Final Words
Hero Motors DRHP filing marks not just a financial milestone but a strategic inflection point. Backed by a legacy of engineering, deep global OEM ties, and ambitious EV strategies, the company is vying to be a dominant player in the global mobility transformation.
While the short-term profitability and capital efficiency metrics warrant caution, Hero Motors’ technology investments, product diversification, and strategic global expansions are poised to make it a formidable force in the electrified mobility ecosystem.
Investors eyeing long-term bets in India’s growing EV ecosystem and export-led auto components manufacturing could find Hero Motors an intriguing prospect, especially given its pioneering role in micro-mobility powertrains.
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