Hero Motors IPO

Strengths · 8

• 01Profit has more than doubled in two years, from Rs 17.04 crore in FY2024 to Rs 32.80 crore in FY2025 and Rs 41.17 crore in FY2026.
• 02EBITDA has grown strongly over the same period, from Rs 86.28 crore to Rs 147.78 crore.
• 03Being the only manufacturer in India producing and exporting CVT hubs and integrated electric powertrains for e-bikes is a genuine technical niche that took years to build.
• 04It sells into the United States, Europe, India and ASEAN, so it is not dependent on the Indian vehicle market alone.
• 05The product range spans both electric and non-electric powertrains, so it earns from today's vehicles while being positioned for the shift to EVs.
• 06It supplies across many vehicle types, from two wheelers and e-bikes to hybrid cars, heavy duty vehicles and eVTOL applications.
• 07RoCE was 19.77% and net worth grew from Rs 385.44 crore in FY2024 to Rs 482.45 crore in FY2026.
• 08Rs 190 crore of the issue money repays borrowings and the rest goes into expanding capacity at its Gautam Buddha Nagar facility in Uttar Pradesh.

Risks · 8

• 01This is the most expensive issue in the current batch by a wide margin, at about 93.33 times earnings on an EPS of only Rs 0.90.
• 02Return on net worth is only 8.53%, which is very low against that valuation.
• 03The profit margin is thin at 3.46%, and sales growth is slow. Total income rose only about 9% in FY2026, from Rs 1,111.23 crore to Rs 1,216.74 crore.
• 04Debt is high and is not coming down. Total borrowing was Rs 400.79 crore as on 31 March 2026 against a net worth of Rs 482.45 crore, and it has stayed above Rs 400 crore for two years.
• 05A large part of the business depends on European and American demand for e-bikes and vehicles, so it carries currency risk and exposure to those economic cycles.
• 06Powertrain work is won programme by programme from vehicle makers. Losing a programme, or a customer delaying a launch, removes that revenue for years.
• 07The eVTOL and advanced EV applications are early stage markets, so the money and effort going into them may take a long time to earn.
• 08This is a fresh issue combined with an offer for sale, and promoter holding falls from 84.67% to 61.08% after the issue.

Hero Motors Limited was started in April 1998. It is an automotive technology company that designs, develops, makes and supplies powertrain solutions to vehicle manufacturers. A powertrain is everything that turns engine or motor power into movement at the wheels, so the company supplies the working heart of a vehicle rather than a body part.

It works on both electric and non-electric powertrains, for two wheelers, performance cars, e-bikes, off-road vehicles, electric and hybrid cars, heavy duty vehicles and even eVTOL, which are electric vertical take off aircraft. It offers both complete systems and individual components, covering design, prototyping, validation, development and delivery. Its known areas are continuously variable transmissions, EV transmissions, electric motors, integrated drive units and gear sets.

The business runs in two segments. Powertrain Solutions covers Gears and Transmissions for automotive and mobility use, and Bike Powertrain for micro-mobility and global e-bike makers. The Alloys and Metallics segment supplies sheet metal and related work. The company describes itself as a first mover in the global e-bike powertrain market and as the only manufacturer in India producing and exporting CVT hubs and integrated electric powertrain products for e-bikes. It sells to customers in the United States, Europe, India and the ASEAN region.

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