Hero Motors Files DRHP: Bets On 40% CVT Export Boom, BMW, Ducati Among Anchor Clients

Hero Motors, a outstanding 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 lift funds by way of an IPO. The proposed challenge marks a major milestone for the corporate because it accelerates its transformation into a world chief in electrical and efficiency powertrain options.

Hero Motors IPO includes a contemporary challenge of fairness shares aggregating as much as INR 800 crore, alongside an OFS of shares value INR 400 crore, bringing the whole provide dimension to INR 1,200 crore.

Hero Motors IPO: Promoters and Selling Shareholders

The promoters of Hero Motors embrace Pankaj Munjal, Charu Munjal, Abhishek Munjal, and O.P. Munjal Holdings. Notably, O P Munjal Holdings, the most important promoting shareholder within the OFS, is offloading shares value as much as INR 390 crore.

Other sellers embrace Bhagyoday Investments and Hero Cycles, contributing INR 5 crore every to the OFS. The IPO will probably be managed by ICICI Securities, DAM Capital Advisors, and JM Financial, with KFin Technologies performing because the registrar.

Utilisation of Funds

The firm plans to deploy the online proceeds from the contemporary challenge as follows:

• INR 285 crore for compensation/prepayment of sure borrowings.
• INR 237 crore in direction of capital expenditure for capability growth on the Gautam Buddha Nagar facility.
• The remaining proceeds are earmarked for inorganic progress alternatives, strategic acquisitions, and basic company functions.

Business Overview: Integrated Global Powertrain Innovator

Hero Motors positions itself as considered one of India’s main powertrain know-how corporations with a diversified product portfolio spanning electrical drive items (EDUs), CVT hubs, gearboxes, motors, and alloy parts. Its vertically built-in mannequin helps a whole worth chain from design to high-volume manufacturing.

The firm operates throughout six services globally, together with manufacturing vegetation in India (Uttar Pradesh, Ludhiana), Thailand (Samut Prakan), and a design centre within the United Kingdom (Maidenhead).

Key Customers and Global Footprint

Hero Motors has cultivated a high-profile international consumer base, together with BMW AG, Ducati, Formula Motorsport, Enviolo, Hummingbird EV, and HWA AG. The firm is the unique provider for a number of BMW applications and maintains decade-long relationships with its high 5 shoppers, contributing over 60% of income.

Revenue from worldwide markets—Europe (29.33%), USA (7.7%), and ASEAN areas—accounted for practically 40% of its high line in FY24, with India remaining the dominant contributor at 58.72%.

Financial Performance: Moderate Growth Amid Heavy Investment

Cash move from operations remained wholesome at INR 128.5 crore in FY24, however heavy investments in capex and acquisitions drove unfavourable investing money move of INR 76.93 crore, whereas financing money flows turned unfavourable as a consequence of repayments and lease liabilities.

Segmental Analysis: Powertrain on the Rise

Hero Motors’ enterprise is split into two main segments:

1. Powertrain Solutions (Gears & Transmissions + Bike Powertrain):
   • Contributed 48.88% of FY24 income
   • Includes EV-focused sub-segments equivalent to EDUs, CVTs, and electrical motors
   • EV section contributed INR 128.09 crore in FY24 (~12.03% of income)
2. Alloys and Metallics (A&M):
   • Traditionally stronger contributor at 51.12%
   • Supplies structural auto parts like swing arms, chain instances, and many others.

The firm’s EV enterprise, regardless of exhibiting a dip in FY24 as a consequence of European e-bike stock overhang, is anticipated to rebound given the underlying business progress.

EV Opportunity and Market Position

Hero Motors has been a pioneer in e-bike CVT options, being the one Indian exporter of CVT hubs to international OEMs. The agency is leveraging its JV with Yamaha Motors Japan (HYM model) to supply high-torque electrical motors and is increasing into built-in EDU options underneath its proprietary ‘ESYNC’ model.

The international e-bike business is projected to develop at a CAGR of 13%–15% to succeed in 14–18 million items by 2029, whereas CVT hub demand is anticipated to skyrocket at 35%–40% CAGR. This positions Hero Motors strongly to capitalise on the shift in direction of micro-mobility.

Additionally, its strategic acquisitions, notably of Hewland Engineering (UK) in 2022–23, have boosted its design, simulation, and prototyping capabilities, notably in efficiency EVs and motorsports.

Risks and Challenges

Despite promising progress, sure pink flags deserve consideration:

• High buyer focus: Top 10 shoppers contributed over 76% of FY24 income.
• Rising leverage: Net debt to EBITDA rose to 3.45x (not annualised) as of Dec 2024, suggesting rising monetary leverage.
• Capital depth: 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 corporate with over three many years of expertise. CEO Amit Gupta, a Harvard alumnus and ISB graduate, has steered the corporate’s EV pivot since 2004. The board consists of names like Andrew Palmer (former CEO, Aston Martin) and Jyoti Arora, former IAS officer, reflecting sturdy company governance.

Final Words

Hero Motors DRHP submitting marks not only a monetary milestone however a strategic inflection level. Backed by a legacy of engineering, deep international OEM ties, and impressive EV methods, the corporate is vying to be a dominant participant within the international mobility transformation.

While the short-term profitability and capital effectivity metrics warrant warning, Hero Motors’ know-how investments, product diversification, and strategic international expansions are poised to make it a formidable pressure within the electrified mobility ecosystem.

Investors eyeing long-term bets in India’s rising EV ecosystem and export-led auto parts manufacturing may discover Hero Motors an intriguing prospect, particularly given its pioneering position in micro-mobility powertrains.

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