Hero Motors, a two-wheeler auto component company and the entity of HMC Group filed its Draft Red Herring Prospectus with the Securities and Exchange Board of India, putting it on this important path for raising capital. The IPO is expected to raise Rs 900 crore. It would involve fresh issuance of equity shares worth Rs 500 crore and an offer-for-sale of shares worth Rs 400 crore by the promoters.
According to the OFS, promoter O P Munjal Holdings would sell shares worth Rs 250 crore, Bhagyoday Investments Rs 75 crore, and Hero Cycles Rs 75 crore. A pre-IPO placement of Rs 100 cr is also being mooted, which, if completed successfully, will cut the amount it plans to mop up for general corporate purposes.
Hero Motors, owned by Pankaj Munjal, is one of the most reputed companies that provide leading-edge automotive technology supplies through electric and non-electric powertrains. The company caters to top-ranked OEMs based in the United States, Europe, India, and ASEAN.
The Company provides its powertrain solutions to all types of automotive segments, such as two-wheelers, e-bikes, off-road vehicles, electric and hybrid cars, heavy-duty vehicles, and even e-VTOL aircraft.
HERO has a huge clientele of top global companies like BMW AG, Ducati Motor Holding SPA, and ENVILO International Inc., among others. Hero Motors enjoys a special status as the one and only Indian Company manufacturing and exporting CVT hubs for world e-bike OEMs. The company is also the only manufacturer of Integrated Electric Powertrain Products for e-bikes in India.
It has two major operating segments, powertrain solutions and alloys and metallics, and six manufacturing facilities in India, the United Kingdom, and Thailand. The powertrain segment provides integrated systems through which energy can be supplied to a vehicle and the transformation process needed to drive such a vehicle, while the alloys and metallics segment supplies sheet metal and tubular assemblies mainly to automotive OEMs.
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In its monetary expressions, Hero Motors declared a profit till March 2024 amounting to Rs 17 crore, marking a big decline of around 58% from the last year. The firm saw a marginal growth of 0.9% in its revenues by the year-end at Rs 1,064.4 crore, while EBITDA slipped 23.7% to settle at Rs 63.8 crore, with margins narrowing by 190 bps to 6% on lower input prices.
ICICI Securities, DAM Capital Advisors, and JM Financial will be the book-running lead managers of the offering, advising Hero Motors at this important point in the journey of growth.
People May Ask
What is the size and structure of the Hero Motors IPO?
The Hero Motors IPO raises ₹900 crores. This includes a fresh issue of equity shares of ₹500 crores and an offer-for-sale by promoters worth ₹400 crores. Under this, O P Munjal Holdings will sell shares worth ₹250 crores and Bhagyoday Investments and Hero Cycles will each sell ₹75 crores of equity shares to the public.
What are the main objectives of the IPO?
The primary objectives are:
- Repayment or prepayment of some borrowings.
- Funding the capital expenditure on expansion of the Gautam Buddha Nagar facility located in Uttar Pradesh.
- General corporate purposes
- Meeting working capital requirements
Who are the promoters and major shareholders of Hero Motors?
O P Munjal Holdings is the largest promoter, holding 71.55 percent. Bhagyoday Investments and Hero Cycles hold 6.28 percent and 2.03 percent each. South Asia Growth Invest LC has a shareholding of 12.27 percent in the company.
Hero Motors operates in what segments, and who are the key customers?
Hero Motors functions in the powertrain solutions sector, servicing electric powertrains and non-electric powertrains. Its chief customers are international leaders in this sector, such as BMW AG, Ducati, and several electric bicycle manufacturers.
The Hero Group operates in several important sectors, such as two-wheelers, e-bikes, off-road vehicles, and electric/hybrid cars.
What has been the financial performance in the recent past of Hero Motors?
In the last fiscal year ending March 2024, Hero Motors reported a net profit of ₹17 crore, down by a massive 58% from the previous year’s profit of ₹40.5 crore. The revenue for the year inched up 0.9% to ₹1,064.4 crore, but the EBITDA tumbled by 23.7% to ₹63.8 crore.
What is the potential impact of the pre-IPO placement?
Hero Motors can also consider a pre-IPO placement for Rs 100 crore. If the company does this, the amount will be reduced from the fresh issue allocation for general corporate purposes.
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