Business Overview
Hero Motors Limited is an automotive technology company engaged in designing, developing, manufacturing and supplying highly engineered powertrain solutions to automotive original equipment manufacturers in the United States, Europe, India and the ASEAN region. Incorporated in April 1998 and registered at Hero Nagar, Ludhiana, Punjab, the Company operates two segments: Powertrain Solutions, comprising the Gears and Transmissions and Bike Powertrain sub-units, and Alloys and Metallics, which supplies sheet metal and tubular assemblies. In Fiscal 2026 Powertrain Solutions contributed 53.67% of revenue from operations and Alloys and Metallics 46.33%.
According to the CRISIL Report commissioned by the Company, Hero Motors is the only player manufacturing and exporting continuously variable transmission hubs to global e-bike original equipment manufacturers from India, and the only manufacturer of integrated electric powertrain products for e-bikes in India. It commenced operations in 2001 with the Alloys and Metallics segment, acquired a strategic stake in the United Kingdom motorsport transmission specialist Hewland Engineering Ltd in 2022 and a majority stake in 2023, entered a joint venture with Yamaha Motors Japan in 2021 which commenced operations in 2022, and launched a transmission facility at Samut Prakan, Thailand in 2023. Revenue from electric vehicle applications rose from ₹128.09 Crore, or 12.03% of revenue from operations in Fiscal 2024, to ₹273.29 Crore, or 23.00%, in Fiscal 2026.
As of March 31, 2026 the Company operated six manufacturing facilities across India, the United Kingdom and Thailand, together with two technology centres at Southam in the United Kingdom and at Gautam Buddha Nagar, Uttar Pradesh, and employed 1,388 permanent employees. Its customers include BMW AG, Ducati, enviolo, Formula Motorsport, HWA AG and Hero MotoCorp. Revenue from operations grew from ₹1,064.39 Crore in Fiscal 2024 to ₹1,188.35 Crore in Fiscal 2026, while restated profit for the year increased from ₹17.04 Crore to ₹41.17 Crore over the same period. Revenue from international customers was ₹491.53 Crore, or 41.36% of revenue from operations, in Fiscal 2026.
IPO Details
| Particulars | Details |
|---|---|
| IPO Date | September 16, 2026 to September 18, 2026 |
| Issue Type | Book Built Issue |
| Tentative Listing Date | September 23, 2026 on BSE and NSE |
| Face Value | ₹10 per Equity Share |
| Price Band | ₹79 to ₹84 per Equity Share |
| Lot Size | 178 Equity Shares |
| Minimum Retail Investment | ₹14,952 for 178 shares at the Cap Price |
| Issue Size | ₹1,000.00 Crore |
| Fresh Issue | ₹600.00 Crore |
| Offer for Sale | ₹400.00 Crore |
| Post-Issue Market Cap | ₹3,815.41 Crore at the Cap Price |
Objects of the Offer
The Company will not receive any proceeds from the Offer for Sale. The Net Proceeds of the Fresh Issue are proposed to be utilised towards the following objects:
| Issue Objects | Est. Amt (₹ Cr.) |
|---|---|
| Repayment/prepayment/redemption, in full or in part, of certain outstanding borrowings availed by the Company | 190.00 |
| Capital expenditure through purchase of equipment required for expansion in capacity of the Gautam Buddha Nagar, Uttar Pradesh facility | 200.00 |
| Funding inorganic growth through unidentified acquisitions and other strategic initiatives and general corporate purposes | 210.00 |
| Net Proceeds | 600.00 |
Key Strengths and Opportunities
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Among India’s Leading Solutions Providers to the Global E-Mobility Industry Backed by Diversified Product and Service Offerings
Revenue from sales to the e-mobility industry was ₹273.29 Crore, ₹175.59 Crore and ₹128.09 Crore in Fiscals 2026, 2025 and 2024, accounting for 23.00%, 16.12% and 12.03% of revenue from operations respectively. The Company is among the few globally that design high-performance transmission systems capable of handling demanding torque requirements while keeping components lightweight and meeting the noise, vibration and harshness standards of electric vehicles. Its micro-mobility portfolio comprises continuously variable transmission hubs, 36V electric motors developed with Yamaha Motors Japan, and high-efficiency electric drive units integrating the battery, motor, controller, sensors and charger. Per the CRISIL Report, the market value of continuously variable transmission hubs in 2031 is projected at ₹3,500 Crore to ₹3,700 Crore, a CAGR of 33% to 38% from 2025 to 2031. -
Growing Market Presence in the Electric Bikes and Premium Two-Wheeler Segments
Over the last five years the Company has grown its business with premium two-wheeler original equipment manufacturers globally, partnering with BMW, Ducati and a leading American two-wheeler manufacturer for powertrain solutions covering design, development, prototyping, validation and high-volume manufacturing. Per the CRISIL Report, the global e-bike market is projected to reach 12.5 million to 14.5 million units by 2031 at a CAGR of 6% to 9% from 2024 to 2031. The Company entered the electric drive unit segment under the ‘ESYNC’ brand in 2023 to serve the e-bike market. -
Longstanding Relationships with Premier Global Original Equipment Manufacturers
The Company’s customer base spans automotive and non-automotive sectors and includes global two-wheeler manufacturers BMW, Ducati and Hero MotoCorp, motorsport participants Formula Motorsport and HWA Engineering, commercial vehicle and off-road manufacturers such as Escorts, and enviolo, alongside global manufacturers such as B&S and supercar makers in the non-automotive segment. The average tenure of the relationship with its top five customers as of March 31, 2026 was over 12 years. -
Advanced Infrastructure with Geographically Diverse Operations
The Company’s Gears and Transmissions facilities are dispersed across India, the United Kingdom and Thailand, placing it close to customers and supporting cost-competitive supply. Its Gautam Buddha Nagar, Uttar Pradesh facilities carry precision manufacturing setups including teeth honing, teeth grinding and laser welding machines; the Samut Prakan, Thailand gearbox assembly plant features semi-automated assembly lines, in-house gear machining, advanced heat treatment and comprehensive end-of-line testing; and the Maidenhead, United Kingdom facility offers concept studies, design, prototyping and low-volume gearbox manufacturing supported by the Southam technology centre. Revenue from international customers was ₹491.53 Crore, ₹446.10 Crore and ₹439.40 Crore, being 41.36%, 40.94% and 41.28% of revenue from operations in Fiscals 2026, 2025 and 2024 respectively. -
Strong Research and Development Capabilities and Long-Term Partnerships
Research and development expenditure was ₹89.59 Crore, ₹77.27 Crore and ₹79.31 Crore in Fiscals 2026, 2025 and 2024, representing 7.54%, 7.09% and 7.45% of revenue from operations respectively. The acquisition of a majority stake in Hewland granted access to advanced design and prototyping capabilities, enabling the Company to cover the entire value chain and transition into a comprehensive systems provider rather than a make-to-print supplier. In the bike powertrain unit, collaboration with enviolo produced the ‘Urban’ model at optimised cost, under which the Company secured exclusive manufacturing rights for global markets and selling rights for the India and ASEAN markets.
Key Risks
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Customer Concentration
Revenue from the top ten customers was ₹866.14 Crore, ₹850.20 Crore and ₹819.19 Crore in Fiscals 2026, 2025 and 2024, representing 72.89%, 78.03% and 76.96% of revenue from operations, with the single largest customer alone contributing 35.57% in Fiscal 2026. The Company has exclusivity arrangements with certain customers requiring exclusive supply, and any decrease in demand from, or termination of arrangements with, these customers would adversely affect its business, results of operations, financial condition and cash flows. -
Loss-Making Subsidiaries
Six of the Company’s subsidiaries recorded losses in Fiscal 2026: Hero Motors Thai Limited ₹6.67 Crore, HYM Drive Systems Private Limited ₹4.91 Crore, Hero EDU Systems Private Limited ₹4.74 Crore, Hewland Engineering Ltd ₹3.74 Crore, Spur Technologies Private Limited ₹1.69 Crore and Munjal STP Industries Private Limited ₹0.15 Crore. As of March 31, 2026 the Company had invested ₹125.88 Crore into its subsidiaries, and there is no assurance they will not incur further losses requiring additional infusions. -
Substantial Capital Expenditure and Working Capital Requirements
Capital expenditure was ₹92.25 Crore, ₹152.40 Crore and ₹132.84 Crore in Fiscals 2026, 2025 and 2024, while trade receivables rose from ₹194.79 Crore in Fiscal 2024 to ₹252.90 Crore in Fiscal 2026 and receivable days lengthened from 67 to 78 over the same period. A significant amount of working capital is required to finance materials and manufacturing before payment is received from customers, and an inability to obtain adequate working capital on favourable terms and in a timely manner may adversely affect results of operations, cash flows and financial condition. -
Indebtedness and Restrictive Covenants
As of March 31, 2026 outstanding long-term debt was ₹98.77 Crore and short-term debt ₹302.02 Crore, with a debt-to-equity ratio of 0.83, and as of July 31, 2026 total outstanding secured borrowings were ₹427.02 Crore while borrowings payable on demand were ₹178.77 Crore, representing 41.87% of total outstanding borrowings. The financing arrangements require lender consent for changes in capital structure, shareholding pattern, board constitution and key managerial personnel, and failure to comply could permit lenders to enforce security over the hypothecated current assets and movable properties. -
Under-Utilisation of Manufacturing Capacities
Capacity utilisation at the HYM facility was 14.56% in Fiscal 2026 against 5.90% in Fiscal 2025, and at the Spur facility 50.29% against 45.43%, on account of subdued demand for the products those facilities manufacture. Variations in customer requirements can force changes in manufacturing processes and production schedules, producing a mismatch between capacity and utilisation, and under-utilisation over extended periods or significant under-utilisation in the short term could materially and adversely affect the business, growth prospects and future financial performance.
Financial Snapshot
| Key Performance Indicator | Units | FY26 | FY25 | FY24 |
|---|---|---|---|---|
| Revenue from Operations | ₹ Cr. | 1,188.35 | 1,089.59 | 1,064.39 |
| Revenue from Operations Growth | % | 9.06 | 2.37 | 0.93 |
| Gross Profit | ₹ Cr. | 495.46 | 452.16 | 419.37 |
| Gross Margin | % | 41.69 | 41.50 | 39.40 |
| EBITDA | ₹ Cr. | 147.78 | 114.00 | 86.28 |
| EBITDA Margin | % | 12.44 | 10.46 | 8.11 |
| Adjusted EBITDA | ₹ Cr. | 160.24 | 128.82 | 125.74 |
| Adjusted EBITDA Margin | % | 13.48 | 11.82 | 11.81 |
| Restated Profit for the Year | ₹ Cr. | 41.17 | 32.80 | 17.04 |
| PAT Margin | % | 3.46 | 3.01 | 1.60 |
| Basic EPS | ₹ | 1.15 | 0.67 | 0.36 |
| Return on Equity | % | 8.56 | 7.70 | 4.54 |
| Return on Capital Employed | % | 19.77 | 18.84 | 23.23 |
| Debt to Equity | x | 0.83 | 0.96 | 0.81 |
| Current Ratio | x | 0.94 | 1.00 | 1.09 |
| Receivable Days | Days | 78 | 68 | 67 |
| Inventory Days | Days | 64 | 64 | 62 |
| Trade Payable Days | Days | 43 | 46 | 47 |
| Capacity Utilisation | % | 72.71 | 71.96 | 72.40 |
Peer Comparison
| Company | Revenue (₹ Cr.) | P/E (x) | RoNW (%) |
|---|---|---|---|
| Hero Motors Limited | 1,188.35 | 73.68 | 8.53 |
| CIE Automotive India Limited | 9,406.47 | 17.68 | 13.18 |
| Endurance Technologies Limited | 14,595.88 | 40.84 | 15.29 |
| Sona BLW Precision Forgings Limited | 4,449.46 | 76.50 | 10.77 |
| UNO Minda Limited | 19,657.59 | 59.84 | 19.59 |
| Varroc Engineering Limited | 8,890.49 | 56.15 | 18.70 |
Conclusion
Hero Motors’ EV opportunity is promising, but the IPO appears fully priced despite execution risks still playing out. The company has built a differentiated position in e-bike powertrains and supplies global OEMs such as BMW, Ducati and Hero MotoCorp, while EV revenue and margins have improved. However, the broader financial picture remains mixed, with revenue growing around 6% over FY24-FY26, several overseas subsidiaries remaining loss-making and newly added capacities in Thailand, the UK and HYM operating at very low utilisation. At the upper price band, the issue demands a premium valuation despite generating the lowest return on net worth among listed peers. The long-term EV optionality is attractive, but much of that optimism already appears reflected in the valuation. So, we recommend avoiding the Hero Motors IPO.
