Hero Electric in talks to raise $250mn

“The EV manufacturer is in discussions with a few sovereign wealth funds and venture capital players to raise around $250 million in a Series C funding round," one of the two people said on the condition of anonymity. The company has hired Jefferies Group to manage the fundraising, the second person said, also declining to be named.

India’s electric two-wheeler market has become crowded, with Hero Electric, one of the country’s oldest such companies, competing with Ola Electric, Ather Energy (backed by Hero MotoCorp), Ampere, TVS Motor, Okinawa Autotech, Euler Motors, Simple Energy and Bajaj Auto, among others. Each of them is aiming for a slice of the segment that is expected to grow 24 times to touch 17.7 million units by 2030, according to estimates by venture capital fund Blume.

Electric two-wheelers are becoming popular, with a significant drop in the total cost of ownership because of government subsidies and lower battery prices.

Spokespeople for Hero Electric and Jefferies did not respond to emailed queries till press time.

Delhi-based Hero Electric has been evaluating plans to raise capital since late last year, about six months after it closed its Series B funding in July. The firm raised ₹220 crore, led by Gulf Islamic Investments, a UAE-based financial services company, and existing investor Oaks Asset Management. It could not be ascertained if existing investors will sell their stakes.

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With surging sales, EV manufacturers have been in the market to raise funds to expand capacity and grab market share quickly.

Year to date, venture capital and private equity companies have invested $666 million across 24 transactions in Indian electric mobility companies, a July report by IVCA-EY-Induslaw said.

According to the report, Indian EV companies saw external investments jump eightfold to $1.7 billion in 2021 from $181 million in the previous year.

EV registrations almost tripled to 330,000 units in 2021 from the year before. EV sales in the March quarter were almost 110,000 units.

Founded in 1993, Hero Electric is part of Vijay Munjal-led Hero Eco Group and has sold more than 450,000 electric two-wheelers, and has more than 750 sales and service outlets. It sells electric scooters and cycles under the Atria, Flash, Nyx, Optima, Photon and Velocity E-Cycle brands.

In 2018, the company raised ₹160 crore from Mumbai-based investment management firm Alpha Capital Advisors Pvt. Ltd and Oaks Asset Management. It raised ₹35 crore the following year from Jupiter India Fund.

Hero Electric claimed sales of 100,000 vehicles in FY22. It also opened its second plant in Ludhiana to increase production capacity, targeting to sell more than 250,000 units by the end of March, and a million units over the next five years.

Last month, Hero Electric launched its hybrid sales channel by taking online bookings, and delivering through its EV dealerships. The company also regained its pole position in July after a sales decline in the months before. Its July sales rose 35% to 8,786 units from 6,504 in June.

Meanwhile, rival Ola Electric, among the nation’s leading electric scooter makers, has announced plans to launch its first electric car in 2024.

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