Hero Motors IPO: South Asia Growth Invest-backed auto company files DRHP at SEBI for ₹900 crore IPO launch

Hero Motors IPO: Hero Motors, an auto-components company under the Hero Motors Company (HMC) Group, has taken a significant step towards going public.  The company, backed by South Asia Growth Invest, has submitted a draft red herring prospectus (DRHP) to the Securities and Exchange Board of India (SEBI) to raise ₹900 crore through an initial public offering (IPO), as per filing on August 23.

According to the DRHP filed on August 23, the upcoming IPO will comprise a fresh equity issuance of ₹500 crore and an offer-for-sale (OFS) of ₹400 crore worth of shares by the company's promoters. Promoter OP Munjal Holdings plans to sell shares worth ₹250 crore through the OFS, while Bhagyoday Investments and Hero Cycles will each offload shares worth ₹75 crore.

Additionally, Hero Motors may explore a pre-IPO placement of ₹100 crore before filing the Red Herring Prospectus with the Registrar of Companies (ROC). Should this placement occur, the proceeds from it would reduce the amount allocated for general corporate purposes from the fresh issue, as per the report.

OP Munjal Holdings currently owns a 71.55 per cent stake in Hero Motors on a fully diluted basis. Bhagyoday Investments and Hero Cycles hold 6.28 per cent and 2.03 per cent stakes, respectively, while investor South Asia Growth Invest LLC has a 12.27 per cent shareholding in the company.

Hero Motors is a leading provider of powertrain solutions, including both electric and non-electric powertrains, to automotive original equipment manufacturers (OEMs) across the United States, Europe, India, and the ASEAN region. The company serves a diverse clientele in the automotive industry, including manufacturers of two-wheelers, e-bikes, off-road vehicles, electric and hybrid cars, heavy-duty vehicles, and electric vertical take-off and landing (eVTOL) aircraft.

The company's global customer base includes renowned names such as BMW AG, Ducati Motor Holding SPA, Enviolo International Inc., Formula Motorsport, HUMMINGBIRDEV Inc., and HWA AG, as well as leading electric bicycle (e-bike) manufacturers.

Owned by Pankaj Munjal, Hero Motors is the only Indian company manufacturing and exporting continuously variable transmission (CVT) hubs for global e-bike OEMs. It is also the sole producer of integrated electric powertrain products for e-bikes in India. The company operates in two main segments: powertrain solutions and alloys and metallics, with six manufacturing facilities located in India, the United Kingdom, and Thailand.

Hero Motors financials 

Hero Motors reported a net profit of ₹17 crore for the fiscal year ending March 2024, a significant decrease of 58% compared to the previous year's profit of ₹40.5 crore. This decline was attributed to muted growth in revenue, lower operational performance, and higher employee costs. The company's revenue for the year stood at ₹1,064.4 crore, a modest 0.9% increase from the previous year's ₹1,054.6 crore. Meanwhile, EBITDA (earnings before interest, tax, depreciation, and amortization) fell by 23.7% to ₹63.8 crore, with margins shrinking by 190 basis points to 6%, despite lower input costs.