HERO MOTORS — RHP Analysis
Filed with SEBI on
Hero Motors Limited designs, develops, and manufactures powertrain solutions and alloy/metallic components for global and domestic OEMs in two-wheelers, e-bikes, and performance automotive sectors.
Central question
Can Hero Motors successfully scale its high-margin EV and bike powertrain solutions globally while managing severe customer concentration and debt obligations?
Hero Motors exhibits established technical capabilities and sole-exporter status from India in CVT hubs for e-bikes, but remains exposed to high revenue concentration with top 10 customers contributing 72.89% of revenue and lack of long-term supplier pricing contracts.
Offer structure
| Total issue size | ₹1,000 Cr |
| Fresh issue | ₹600 Cr |
| Offer for sale | ₹400 Cr |
| Price band | ₹79–₹84 |
Prepayment/repayment of certain outstanding borrowings and purchase of equipment for capacity expansion.
₹190.00 crore for debt repayment and ₹200.00 crore for capital expenditure across FY2027-FY2029.
What it sells
Who pays: Global and domestic automotive and e-bike original equipment manufacturers (OEMs) including BMW, Ducati, and enviolo.. What it sells: Powertrain solutions (gears, transmissions, CVT hubs, bike powertrains) and alloy and metallic components.. How it delivers: Through six manufacturing facilities located across India, the United Kingdom, and Thailand, supported by two technology centres.. How it earns: Generates revenue from direct sales of manufactured powertrain systems and alloy/metallic components to OEMs based on purchase orders..
Restated financials
| Period | Revenue | EBITDA | PAT | EPS | ROE |
|---|---|---|---|---|---|
| FY2024 | ₹1,064.39 Cr | ₹125.74 Cr | ₹17.04 Cr | 0.35 | |
| FY2025 | ₹1,089.59 Cr | ₹128.82 Cr | ₹32.8 Cr | 0.66 | |
| FY2026 | ₹1,188.35 Cr | ₹160.24 Cr | ₹41.17 Cr | 1.14 |
Business model
Hero Motors Limited is an Indian automotive technology company engaged in designing, developing, manufacturing, and supplying powertrain solutions and alloy and metallic components. The company operates across two primary business segments: Powertrain Solutions (comprising Gears & Transmissions and Bike Powertrains) and Alloys & Metallics (A&M). It serves global and domestic OEMs in two-wheelers, e-bikes, motorsport/performance automotive, and other mobility applications, generating 58.64% of FY2026 revenue domestically in India and 41.36% internationally (with Europe accounting for 33.59%).
- Hero Motors operates two primary business segments: Powertrain Solutions and Alloys and Metallics (A&M). (Powertrain Solutions: 53.67% of revenue; A&M: 46.33% of revenue, Fiscal 2026) — Defines the core operational structure and revenue profile across powertrain systems and metallic component manufacturing. [1]
- Electric Vehicle (EV) applications contributed 23.00% of revenue from operations in Fiscal 2026, growing from 12.03% in Fiscal 2024. (23.00% (₹2,732.90 million), Fiscal 2026) — Demonstrates rapid commercial expansion into electrified powertrain components across micro-mobility and passenger automotive segments. [1]
- The company exhibits geographic diversification, generating 41.36% of revenue from international markets in Fiscal 2026, primarily driven by Europe. (India: 58.64%; Europe: 33.59%; US: 3.86%; Others: 3.91%, Fiscal 2026) — Highlights export exposure to global OEMs while maintaining a substantial domestic Indian base. [1]
- Hero Motors operates six manufacturing facilities across India, the United Kingdom, and Thailand, alongside two technology centres. (6 manufacturing facilities, 2 technology centers, As of March 31, 2026) — Details the global operational footprint designed for international customer proximity and advanced engineering capabilities. [1]
Open questions: What is the exact product-level SKU count and detailed unit volume breakdown across different sub-segments for each facility?
Growth thesis
Growth is driven by secular global electrification tailwinds in micro-mobility and two-wheelers, capacity additions funded via IPO proceeds (₹2,000.00 million for 26 advanced machining tools at Gautam Buddha Nagar), expansion into integrated electric drive units (EDUs), and geographic extension via the Samut Prakan facility in Thailand.
- Global EV penetration in the motorcycle segment is projected by CRISIL to increase from 2.0% in 2024 to 10.5%–12.5% in 2031 at a CAGR of 34% to 38%. (CAGR of 34% to 38% (to 10.5%-12.5% penetration), 2024 - 2031) — Provides sectoral growth tailwinds for the company's EV powertrain product portfolio. [1]
- Hero Motors plans to expand capacity at its Gautam Buddha Nagar plant by acquiring 26 specialized gear grinding, shaping, hobbing, and grinding machines totaling ₹2,276.40 million. (26 machines totaling ₹2,276.40 million, FY2027 to FY2029) — Details the physical operational mechanism of capacity expansion funded via Fresh Issue proceeds (₹2,000.00M) and internal accruals. [1]
- The addressable market for Bike Powertrain products is projected to expand from ₹310–352 billion in 2025 to ₹880–922 billion in 2031 at a CAGR of 16% to 18%. (CAGR of 16% to 18%, 2025 - 2031) — Quantifies the addressable market size expansion for micro-mobility CVT, motor, and EDU offerings. [1]
Open questions: Has the company signed binding supply contracts for the incremental capacity planned at Gautam Buddha Nagar?
Offer & ownership
The IPO consists of a total Offer aggregating up to ₹10,000.00 million, comprising a Fresh Issue of up to ₹6,000.00 million and an Offer for Sale (OFS) of up to ₹4,000.00 million. The selling shareholders in OFS are Promoter O P Munjal Holdings (up to ₹3,950.00 million) and Promoter Group entity Hero Cycles Limited (up to ₹50.00 million). Pre-Offer outstanding equity capital stands at 382,787,005 equity shares of ₹10 face value.
- The Offer comprises a Fresh Issue of up to ₹6,000.00 million and an Offer for Sale of up to ₹4,000.00 million. (₹10,000.00 million total Offer (₹6,000.00 million Fresh / ₹4,000.00 million OFS), Red Herring Prospectus) — Delineates capital entering the issuer for growth/deleveraging versus secondary liquidity exiting to promoters. [1]
- Promoters and Promoter Group held 85.57% of pre-offer equity share capital (84.67% on a fully diluted basis). (327,540,186 equity shares (85.57%), As of the date of the RHP) — Establishes pre-issue ownership structure and promoter dominance prior to public dilution. [1]
- The Fresh Issue proceeds are allocated towards debt prepayment (₹1,900.00 million) and capacity expansion capex at Gautam Buddha Nagar (₹2,000.00 million). (Debt Repayment: ₹1,900.00 million; Gautam Buddha Nagar Capex: ₹2,000.00 million, FY2027 to FY2029) — Defines the capital deployment schedule across balance sheet deleveraging and manufacturing asset additions. [1]
Open questions: What is the final issue price band and exact number of fresh and OFS equity shares to be issued?; What will be the final post-issue shareholding percentage of the Promoters following completion of the Offer?
Financials
Hero Motors reported restated revenue from operations of ₹11,883.51 million in FY2026, compared to ₹10,895.93 million in FY2025 and ₹10,643.86 million in FY2024. Restated profit for the year increased to ₹411.68 million in FY2026 from ₹327.96 million in FY2025 and ₹170.35 million in FY2024. Consolidated total borrowings stood at ₹4,007.89 million as of March 31, 2026, while cash flows from operating activities were ₹1,440.42 million in FY2026.
- Revenue from operations expanded from ₹10,643.86 million in FY2024 to ₹11,883.51 million in FY2026. (FY2024: ₹10,643.86M; FY2025: ₹10,895.93M; FY2026: ₹11,883.51M, FY2024 - FY2026) — Tracks historical top-line growth trajectory across reporting periods. [1]
- Adjusted EBITDA grew to ₹1,602.44 million (13.48% margin) in FY2026 from ₹1,257.38 million (11.81% margin) in FY2024. (FY2026: ₹1,602.44M (13.48%); FY2025: ₹1,288.21M (11.82%); FY2024: ₹1,257.38M (11.81%), FY2024 - FY2026) — Demonstrates operating margin expansion and underlying cash generation growth. [1]
- Consolidated total borrowings stood at ₹4,007.89 million as of March 31, 2026, comprising ₹987.69 million non-current and ₹3,020.20 million current borrowings. (Total Borrowings: ₹4,007.89 million, As at March 31, 2026) — Quantifies leverage structure and working capital debt reliance. [1]
- Net cash generated from operating activities was ₹1,440.42 million in FY2026 compared to ₹483.43 million in FY2025 and ₹1,319.66 million in FY2024. (FY2026: ₹1,440.42M; FY2025: ₹483.43M; FY2024: ₹1,319.66M, FY2024 - FY2026) — Reflects operating cash generation dynamics and working capital movements across fiscals. [1]
- Total assets were ₹10,598.55 million as at March 31, 2024. (10598.55, As at March 31, 2024) — Represents the company's total restated asset base at the end of Fiscal 2024. [1]
- Total assets were ₹11,646.20 million as at March 31, 2025. (11646.20, As at March 31, 2025) — Represents the company's total restated asset base at the end of Fiscal 2025. [1]
- Total assets were ₹13,718.28 million as at March 31, 2026. (13718.28, As at March 31, 2026) — Represents the company's total restated asset base at the end of Fiscal 2026. [1]
- Total equity was ₹3,748.16 million as at March 31, 2024. (3748.16, As at March 31, 2024) — Reflects the company's total equity base including non-controlling interests as at March 31, 2024. [1]
- Total equity was ₹4,260.08 million as at March 31, 2025. (4260.08, As at March 31, 2025) — Reflects the company's total equity base including non-controlling interests as at March 31, 2025. [1]
- Total equity was ₹4,810.08 million as at March 31, 2026. (4810.08, As at March 31, 2026) — Reflects the company's total equity base including non-controlling interests as at March 31, 2026. [1]
- Total borrowings were ₹3,039.98 million as at March 31, 2024. (3039.98, As at March 31, 2024) — Represents the combined total of non-current (₹817.53 million) and current (₹2,222.45 million) borrowings as of March 31, 2024. [1] [2]
- Total borrowings were ₹4,076.22 million as at March 31, 2025. (4076.22, As at March 31, 2025) — Represents the combined total of non-current (₹1,233.69 million) and current (₹2,842.53 million) borrowings as of March 31, 2025. [1] [2]
Open questions: What are the quarterly financial results subsequent to March 31, 2026?
Moat & defensibility
Hero Motors derives competitive advantages from proprietary technical collaborations, specialized manufacturing capabilities for continuous variable planetary transmissions (CVT) and electric drive units, and long-term co-development relationships with premier global OEMs (such as BMW, Ducati, and enviolo). However, defensibility is counterbalanced by heavy customer concentration (top 10 customers contribute 72.89% of revenue) and absence of long-term supply agreements with raw material suppliers.
- Hero Motors is the sole manufacturer and exporter of CVT hubs to global e-bike OEMs from India. (Sole manufacturer and exporter, Fiscal 2026) — Highlights first-mover entry barriers and sole-supplier position from India for global micro-mobility CVT systems. [1]
- The company relies heavily on its top 10 customers, representing 72.89% of consolidated revenue from operations in Fiscal 2026. (72.89% (₹8,661.40 million), Fiscal 2026) — Represents a concentration risk and structural vulnerability in the company's customer moat. [1]
- The company maintains integrated in-house engineering and R&D capabilities, with R&D spending representing 7.54% of revenue from operations in Fiscal 2026. (₹895.91 million (7.54% of revenue), Fiscal 2026) — Supports technological differentiation through in-house design, prototyping, and testing rather than simple build-to-print manufacturing. [1]
Open questions: What proportion of customer contracts contain minimum volume commitments versus discretionary purchase orders?; What are the renewal terms and termination provisions of the proprietary technology partnership with enviolo and JV terms with Yamaha Motors?
Governance
The Board of Directors comprises 10 members, including 2 Executive Directors, 8 Non-Executive Directors (of which 5 are Independent Directors, including 2 women directors), and 1 Nominee Director from South Asia Growth Invest LLC. Pankaj Munjal serves as Non-Executive Chairman and Amit Gupta serves as MD & CEO. Significant related party transactions exist with Hero Cycles Limited and other group promoter entities.
- The Board consists of 10 directors, including 5 Independent Directors and 2 Executive Directors. (10 Directors (5 Independent, 2 Executive, 3 Non-Executive Non-Independent/Nominee), As of the date of the RHP) — Confirms statutory compliance with corporate governance norms regarding independent board representation. [1]
- Related-party transactions with group entities include purchase of services from Hero Cycles Limited (₹223.36 million in FY2026) and purchase of goods from Munjal Kiriu Industries (₹129.29 million in FY2026). (Hero Cycles services: ₹223.36 million; Munjal Kiriu purchases: ₹129.29 million, Fiscal 2026) — Demonstrates ongoing operational and service entanglements with promoter-controlled entities. [1] [2]
- Amit Gupta, MD & CEO, pledged 1,000,000 equity shares allotted under ESOP to finance the loan availed for exercising his options. (1,000,000 shares pledged (loan of ₹237.40 million), As of the date of the RHP) — Discloses management share encumbrance. [1]
Open questions: What are the terms of the corporate advisory agreement with Nuvomax Nutritionals (owned by director Keshav Misra) post-listing?
Risks
Key operational and financial risks include high customer concentration (top 10 customers contribute 72.89% of revenue; top 1 contributes 35.57%), significant exposure to European markets (33.59% of revenue), reliance on purchase orders without long-term supply agreements for raw materials (raw material cost accounts for 54.99% of revenue), and ongoing environmental litigation by UPPCB.
- Hero Motors' single largest customer contributed 35.57% of revenue from operations in Fiscal 2026. (₹4,227.44 million (35.57%), Fiscal 2026) — Material revenue vulnerability to changes in purchase volumes from the top customer. [1]
- The company does not have definitive supply agreements with all raw material suppliers, relying primarily on short-term purchase orders. (Cost of raw materials consumed: 56.64% of total expenses, Fiscal 2026) — Exposes the business to potential raw material supply disruptions, cost inflation, and delivery delays. [1]
- The Uttar Pradesh Pollution Control Board filed a criminal complaint under the Water Act alleging discharge of untreated effluent at the Greater Noida facility. (Complaint pending before Allahabad High Court, Pending as of RHP date) — Represents statutory environmental litigation against the company and individual directors (Pankaj Munjal and Pratibha Goyal), currently stayed under Section 482 CrPC by the Allahabad High Court. [1]
Open questions: What is the identity and contractual duration for the top 5 undisclosed customer relationships?; What are the specific financial implications if the UPPCB criminal complaint stay is vacated by the High Court?
Valuation framework
The Price Band and Offer Price are left blank [●] in this Red Herring Prospectus. Listed peers include CIE Automotive India, Endurance Technologies, Sona BLW Precision Forgings, UNO Minda, and Varroc Engineering, trading at peer P/E multiples ranging between 17.68x and 76.50x (peer average of 50.20x). For FY2026, Hero Motors reported restated basic EPS of ₹1.15, diluted EPS of ₹1.14, and RoNW of 8.53%, with an NAV per share of ₹12.72 as of March 31, 2026.
- The Price Band, Floor Price, Cap Price, and Offer Price are not disclosed in the packet and remain blank. (Awaiting Price Inputs ([●]), Red Herring Prospectus) — Valuation metrics cannot be calculated deterministically until the price band is announced. [1]
- Hero Motors reported FY2026 Restated Diluted EPS of ₹1.14, Basic EPS of ₹1.15, RoNW of 8.53%, and NAV per share of ₹12.72. (Basic EPS: ₹1.15; Diluted EPS: ₹1.14; RoNW: 8.53%; NAV per share: ₹12.72, Fiscal 2026 / As of March 31, 2026) — Provides baseline earnings and book value parameters for post-pricing valuation multiples. [1]
- Listed peer group P/E multiples range from 17.68x (CIE Automotive India) to 76.50x (Sona BLW Precision Forgings), with an industry average P/E of 50.20x. (Highest: 76.50x; Lowest: 17.68x; Average: 50.20x, As of September 7, 2026) — Establishes the comparative trading valuation benchmark across domestic automotive component manufacturers. [1]
Open questions: What will be the final Cap Price and resulting implied P/E multiple upon price band announcement?
What the filing leaves open
- The analysis is strictly based on the disclosed evidence packet of the Red Herring Prospectus.
- Price Band and issue price per share inputs are pending announcement and are denoted as [●] throughout the document.
- No forward financial guidance (revenue, PAT, or EPS targets) is provided by the issuer.