Hero Motors files DRHP for Rs 900 crore IPO

South Asia Growth Invest backed Hero Motors, the flagship auto-components company of the Hero Motors Company (HMC) Group and one of India’s leading automotive technology companies, has filed its draft red herring prospectus (DRHP) with the market regulator Securities and Exchange Board of India (SEBI) to raise Rs 900 crore through an initial public offering (IPO).

The IPO with a face value of Rs 10 is a mix of fresh issue of up to Rs 500 Cr and an offer for sale up to Rs 400 Cr by promoters. The OFS includes Rs 250 crore worth shares by O P Munjal Holdings, and Rs 75 crore each by Bhagyoday Investments and Hero Cycles.

The company, in consultation with the book-running lead managers, may consider a pre-IPO placement of Rs 100 crore. If such placement is completed, the amount will be reduced from the fresh issue.

Proceeds from the fresh issue of shares will be used to the extent of Rs 200.1 crore for repayment or pre-payment, in full or in part, of certain of its outstanding borrowings availed by the Company, Rs 124 crore for funding capital expenditure towards purchase of equipment required for expansion in capacity of the Gautam Buddha Nagar, Uttar Pradesh facility besides general corporate purposes.

Hero Motors is India’s leading automotive technology companies, as highlighted in a CRISIL Report mentioned in its DRHP. The company specializes in designing, developing, manufacturing, and supplying advanced powertrain solutions to automotive OEMs across the United States, Europe, India, and the ASEAN region.

The Company’s product portfolio includes both electric and non-electric powertrains for a wide range of vehicles, including two-wheelers, e-bikes, off-road vehicles, electric and hybrid cars, heavy-duty vehicles, and eVTOL.

The company operates in two key segments: powertrain solutions and alloys and metallics. Hero Motors has established six manufacturing facilities located in India, the United Kingdom, and Thailand.

Hero Motors has a diverse customer base, including global brands such as BMW AG, Ducati Motor Holding SPA, Enviolo International Inc, Formula Motorsport, HUMMINGBIRDEV Inc, HWA AG, and prominent e-bike manufacturers worldwide. Notably, Hero Motors is the sole Indian manufacturer and exporter of CVT hubs to global e-bike OEMs and the only producer of integrated electric powertrain products for e-bikes within the country.

The company’s revenue from operations saw a slight increase of 0.9%, rising from ₹1,054.6 crore to ₹1,064.4 crore between Fiscals 2023 and 2024. Since 2019, Hero Motors has been securing contracts from European two-wheeler OEMs for the production of complete gearbox systems and has also ventured into the micro-mobility sector by supplying CVT systems.

In 2022, Hero Motors acquired a strategic stake in the British company Hewland from Hero International B.V., which had been associated with Hewland since 2017. In 2021, the company entered into a joint venture with Yamaha Motors Japan to manufacture electric motors under the ‘HYM’ brand, with operations commencing in 2022. Additionally, in 2023, Hero Motors acquired STPL, a company specializing in the production of components for high-end bikes and e-bikes.

According to the CRISIL Report mentioned in the DRHP, Hero Motors is one of the few Indian companies operating an international product development and design center. The company has in-house design and engineering capabilities, supported by robust manufacturing and validation facilities. These include significant investments in research and development (R&D), engineering resources, equipment, assembly lines, transient dynamometer test rigs, and end-of-line testing machines.

ICICI Securities Limited, DAM Capital Advisors Limited, and JM Financial Limited are the book-running lead managers to the issue.