Hero Motors
Engineering Mobility ForwardMobility Through Engineering
IPO Summary (PreQT)
Hero Motors Limited is an automotive technology and engineered-components company providing powertrain solutions and alloys & metallic components to OEMs across India, Europe, the United States and ASEAN. On the RHP restated consolidated basis, FY26 revenue from operations was INR 1,188.4 Cr, EBITDA INR 147.8 Cr and PAT INR 41.2 Cr, with EBITDA margin improving to 12.4% and PAT margin to 3.5%. Powertrain Solutions contributed about 53.7% of FY26 revenue and benefited from e-bike / electric-powertrain growth, while the Company retained material exposure to traditional two-wheeler and performance-mobility programs. The INR 1,000.0 Cr IPO comprises INR 600.0 Cr fresh issue and INR 400.0 Cr OFS; INR 190.0 Cr of fresh proceeds is earmarked for debt reduction and INR 200.0 Cr for Gautam Buddha Nagar capacity expansion. Key monitorables are customer concentration, receivable days, leverage, under-utilisation at newer facilities and execution of the next capacity cycle
IPO Review Rating
Average
MainboardDriving Automotive Innovation Through Engineering, Technology, and Manufacturing Scale
Hero Motors is a better business than the 64.6 score may initially suggest, but the IPO valuation is doing substantial damage to the score. Operationally, the most encouraging feature is the improvement in profitability: EBITDA Margin has expanded from roughly 8.1% in FY24 to 12.4% in FY26, PAT has more than doubled, and FY26 operating cash generation is strong.
The problem is that the top line has not yet grown fast enough to justify a premium growth-company valuation. FY24–FY26 Revenue CAGR is only 5.7%, PAT Margin remains just 3.5%, ROE is 8.6%, and the largest customer alone contributes 35.6% of revenue. Hero Motors therefore still carries meaningful earnings sensitivity despite its strong technology and global-OEM positioning.
The industry story is one of the stronger parts of the IPO. Hero Motors is exposed not only to conventional gears and transmissions but also to CVT hubs, e-bike motors and integrated electric powertrains, where industry growth is substantially faster. Its CRISIL-described first-mover position in Indian CVT hubs and integrated e-bike powertrain products is genuinely differentiated rather than a generic "EV" label. Governance is respectable but not spotless. The experienced promoter, independent-heavy Board and continuing 61.6% promoter ownership are positives. Against those, the current litigation/regulatory proceedings, promoter-group complexity, broad related-party ecosystem and a 40% OFS justify deductions. The key concern is price. At INR 84, the conventional offer-document P/E is around 73.7x, but the more conservative post-issue P/E is approximately 92.7x FY26 earnings. That is materially above an RHP peer average of roughly 50.2x, despite Hero Motors having the lowest RoNW among those peers. The large Fresh Issue makes P/B and EV/EBITDA look more reasonable after adjusting for incoming capital, but it does not eliminate the premium on earnings.
PARAMETER
WEIGHT
SCORE
KEY FACTORS
Financial Performance
40.0%
3.0/5
Hero Motors has strong operating leverage, improving margins and good FY26 cash generation, but the financial profile is held back by only 5.7% Revenue CAGR, thin PAT margins, 8.6% ROE and very high customer concentration. The INR 190.0 Cr planned debt repayment should improve the balance sheet after the IPO
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Detailed Analysis
Revenue from Operations increased from INR 1,064.4 Cr in FY24 to INR 1,089.6 Cr in FY25 and INR 1,188.4 Cr in FY26, a relatively modest 5.7% CAGR
FY26 EBITDA was INR 147.8 Cr, with EBITDA Margin improving materially to 12.4%, from approximately 8.1% in FY24
FY26 PAT was INR 41.2 Cr, translating into a still-thin 3.5% PAT Margin
FY26 Debt/Equity was 0.8x. Leverage is manageable but remains meaningful for a cyclical auto-component business
FY26 ROE was only 8.6%, considerably weaker than several listed peers
OCF was positive at INR 144.0 Cr in FY26, after INR 48.3 Cr in FY25 and INR 132.0 Cr in FY24
Largest customer represented 35.6% of FY26 Revenue; top 10 customers represented 72.9%
Industry
15.0%
3.0/5
Hero Motors has a good sector positioning rather than an exceptionally high-growth underlying industry. Traditional gears and powertrain components are mid-single-digit-to-high-single-digit growth categories, while CVT hubs, electric motors and e-bike powertrains offer much faster growth
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Detailed Analysis
Core gear components are projected to grow 6–8% CAGR, while Hero Motors' faster-growing niches include CVT hubs at 35–40% and e-bike electric-drive motors at 15–17% CAGR
Safety, emissions, trade policy and rapid technology change are meaningful risks, partly offset by supportive EV policy
Traditional auto components are mature, but e-mobility, integrated powertrains and e-bike systems remain structurally high-growth categories
Management
15.0%
3.0/5
The experience profile is strong. Pankaj Munjal has more than three decades of automotive experience, while the Company combines family ownership with professional management led operationally by Managing Director & CEO Amit Gupta. The Board structure is also a positive. The FY25 official Annual Report disclosed ten Directors, including five Independent Directors and two women Independent Directors
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Detailed Analysis
Chairman Pankaj Munjal has more than 36 years of automotive-industry experience and the business has a long Hero-group operating history
Latest official Annual Report disclosure showed 10 Directors: 2 Executive and 8 Non-Executive, of whom 5 were Independent, including 2 women Independent Directors
The group structure results in a broad set of related-party loans, rentals, reimbursements and subsidiary transactions; governance processes are disclosed, but monitoring remains warranted
Current risk disclosures include 17 regulatory proceedings, litigation involving the Company/directors and CIRP involving a promoter-group entity. No separate current promoter-pledge deduction has been assumed
The group structure results in a broad set of related-party loans, rentals, reimbursements and subsidiary transactions; governance processes are disclosed, but monitoring remains warranted
Valuation
20.0%
2.0/5
Hero Motors is valued at approximately 92.7x FY26 earnings on a post-issue basis, materially above the RHP peer average of ~50.2x. The premium looks demanding given the Company’s 8.6% ROE, 3.5% PAT Margin and modest 5.7% FY24–FY26 Revenue CAGR
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Detailed Analysis
Post-issue FY26 P/E is approximately 92.7x, versus an RHP peer average of approximately 50.2x which is a 85% premium
Headline EV/EBITDA is approximately 28.4x, broadly in line to slight premium
Historical P/B at INR 84 is approximately 6.6x using RHP NAV of INR 12.7
FY26 RoNW of 8.5% which is materially below peers
Merchant Banker Track Record
10.0%
5.0/5
The banker consortium is clearly a positive. Hero Motors is not relying on an inexperienced or thinly established merchant banker. All three managers have meaningful current-market execution experience
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Detailed Analysis
Recent 2026 records are positive overall. ICICI's disclosed aggregate is approximately 17%, JM's approximately 7%, while DAM's two completed 2026 transactions shown in its current record averaged roughly 47%
Recent books include Tempsens at 184.1x, ESDS at 142.9x, Caliber at 154.7x and Lumino at 53.1x, although weaker issues also exist
ICICI and JM have delivered a majority of positive listings in their 2026 books, while DAM's currently listed 2026 examples were both positive
TOTAL
100%
3.0/5
Weighted Composite Score
Issue Price
₹79.0 to ₹84.0
As of 11 Sep 2026
GMP
₹8.0
As of 11 Sep 2026
Estimated Gain / Loss
+9.5%
Lot Size
178.0 Shares
Grey Market Premium (GMPs) are shared for knowledge purpose only. PrEqt doesn’t promote or execute the trades.
| Issue size | |
|---|---|
| Overall | ₹1,000.0 Cr |
| Fresh Issue | ₹600.0 Cr |
| Offer for Sale | ₹400.0 Cr |
Minimum Investment
₹14,952.0 / 31,684 shares
Merchant Banker
ICICI Securities Ltd, JM Financial
ICICI Securities Ltd
JM Financial
IPO Document
Offer Start Date
Offer End Date
Valuation
Revenue
PAT (FY'26)
Issue Size
Face Value
₹ 10.0Offer Price
₹ 84.0Lot Size
178.0 sharesSale Type
Fresh capital cum OFSPAT (FY'26)
₹ 41.2 CrPAT Margin (FY'26)
3.5 %P/E Multiple
92.7xEBITDA (FY'26)
₹ 147.8 CrCAGR Growth 3Y
6.0 %ROE (FY'26)
8.6 %ROCE (FY'26)
19.8 %Price to Book Value
6.6xDebt/Equity
0.8xCompany Website
www.heromotors.comExplore new deals
Overview
Fund Allocation
Total: ₹0 CrSource:Company DRHP
Timeline
IPO Open Date
To Be Announced
IPO Close Date
To Be Announced
Tentative Allotment
To Be Announced
Initiation of Refunds
To Be Announced
Credit of Shares to Demat
To Be Announced
Tentative Listing Date
To Be Announced
Business
Products
Business Model
Geographical Presence
Sales Channel
Key Risk Factor
Financial Highlights
Income Statement
Revenue growth with EBITDA and PAT margins
| Financial Metric | FY 2024 | FY 2025 | FY 2026 |
|---|---|---|---|
| Revenue (₹ Cr) | 1,083.4 | 1,111.2 | 1,216.7 |
| Growth (%) | - | 2.4% | 9.1% |
| EBITDA (₹ Cr) | 86.3 | 114.0 | 147.8 |
| EBITDA Margin (%) | 8.0% | 10.3% | 12.1% |
| PAT (₹ Cr) | 17.0 | 32.8 | 41.2 |
| PAT Margin (%) | 1.6% | 3.0% | 3.4% |
OBSERVATIONS & INSIGHTS
Revenue FY25 growth was modest at 2.4%; FY26 accelerated to 9.1% as Powertrain Solutions grew strongly, led by e-bike / electric-powertrain programs, while Alloys & Metallics remained broadly stable
EBITDA increased from INR 86.3 Cr to INR 147.8 Cr across FY24-FY26 as higher Powertrain contribution, operating leverage and lower share-based compensation supported operating profit, margin expanded from 8.1% to 12.4%; FY26 EBITDA margin also improved, indicating that margin expansion was not explained only by lower non-cash share-based expense
PAT nearly doubled in FY25 and rose another 25.5% in FY26 as operating-profit growth outweighed higher depreciation / finance burden. PAT Margin improved from 1.6% to 3.0% and 3.5% because EBITDA margin expanded materially; however, the net margin remains modest because depreciation, interest and tax continue to absorb a meaningful portion of operating profit
Balance Sheet
| Financial Metric | FY 2024 | FY 2025 | FY 2026 |
|---|---|---|---|
| Net Worth | ₹ 385.4 Cr | ₹ 424.0 Cr | ₹ 482.5 Cr |
| Total Assets | ₹ 1,059.9 Cr | ₹ 1,164.6 Cr | ₹ 1,371.8 Cr |
| Total Borrowing | ₹ 304.0 Cr | ₹ 407.6 Cr | ₹ 400.8 Cr |
| Reserves & Surplus | ₹ 32.3 Cr | ₹ 67.7 Cr | ₹ 116.3 Cr |
OBSERVATIONS & INSIGHTS
Total assets: increased 17.8% in FY26 as the Company continued its manufacturing / technology investment cycle and scaled overseas / electric-powertrain operations
Reserves & surplus: increased strongly through retained earnings and equity-linked movements, supporting the rise in net worth despite ongoing capex
Total equity / net worth: rose to INR 482.5 Cr in FY26 as profitability and equity accretion strengthened the capital base
Borrowings: increased materially in FY25 to fund investment and working capital, then reduced slightly to INR 400.8 Cr in FY26; current borrowings increased while non-current borrowings reduced
Cash Flow
| Financial Metric | FY 2024 | FY 2025 | FY 2026 |
|---|---|---|---|
CFO in Cr Cash generated from core business operations. | +13.2 Cr | +4.8 Cr | +14.4 Cr |
CFI in Cr Cash used in / generated from investing activities. | -7.7 Cr | -13.5 Cr | -6.9 Cr |
CFF in Cr Cash from / used in financing activities. | -2.0 Cr | +5.4 Cr | -6.2 Cr |
Working Capital
| Efficiency Metric | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
Debtor Days Average number of days taken to collect customer payments. | - | - | - |
Creditor Days Average time taken to pay suppliers and vendors. | - | - | - |
Inventory Days Average number of days inventory remains unsold. | - | - | - |
CCC (Cash Conversion Cycle) (Debtor Days + Inventory Days - Creditor Days) | - | - | - |
Financial Ratios
Measures the company’s leverage relative to shareholder equity.
OBSERVATIONS & INSIGHTS
ROE: Improved to 8.6% by FY26 as PAT increased faster than the equity base, though returns remain below several listed component peers
ROCE: Improved materially to 19.8% in FY26, reflecting stronger EBIT generation from the capital base despite meaningful borrowings
ROA: Increased from 1.6% to 3.0% because PAT grew faster than total assets
Debt / Equity: Rose during the FY25 investment cycle and improved to about 0.8x in FY26 as earnings / equity increased and net leverage moderated
Interest Coverage: Improved with operating-profit growth, but debt service remains relevant; INR 190.0 Cr of fresh-issue proceeds is specifically earmarked for deleveraging
Industry Overview
Industry Drivers
Automotive Production, Premiumisation and Higher Powertrain Content
Growth in vehicle production and premium mobility increases demand for precision gears, transmissions and engineered metallic components. Premium motorcycles and performance vehicles require higher tolerance, reliability and specialised drivetrain content, supporting suppliers with design and validation capability.
The key drivers are:
• Global / Indian OEM production remains the core volume driver for powertrain and metallic-component suppliers
• CRISIL estimates the gears & transmissions market at roughly INR 3,200-3,300 billion in CY2024
• The same market is expected to grow at about 6.0%-8.0% CAGR through CY2029
• Higher-cc motorcycles and performance vehicles increase gearbox complexity and value per vehicle
Electrification and E-Bike Powertrain Adoption
Electrification changes drivetrain architecture toward electric motors, reduction gears, integrated drive units and electronically controlled systems. Suppliers able to combine mechanical gearing with electric-powertrain design can participate in both ICE and EV programs rather than relying on one propulsion technology.
The key drivers are:
• Hero Motors manufactures integrated e-bike powertrain products and CVT hubs for global customers
• FY26 e-bike revenue increased materially and represented about 12.9% of revenue
• Electric and hybrid platforms still require precision gearing, housings, shafts, motors and system integration
• Technology transition creates growth opportunities but also raises R&D, validation and product-obsolescence risk
Localization, Engineering Outsourcing and Global Supply Chains
OEMs increasingly seek qualified suppliers that can provide design-to-manufacturing capability across regions while meeting cost, delivery and quality standards. Localization reduces supply-chain risk, while engineering outsourcing allows OEMs to access specialized gearbox, transmission and validation expertise without carrying all capability in-house.
The key drivers are:
• Hero Motors supplies customers across India, Europe, the US and ASEAN, giving it a geographically diversified OEM base
• Europe represented about one-third of FY26 revenue, demonstrating meaningful export-linked engineering exposure
• Transmission design / consultancy demand is supported by rising performance, reliability and customization requirements
• Multi-region manufacturing and technology centres can shorten development and delivery cycles for global programs
Risks in the Industry
Automotive-component suppliers remain exposed to vehicle-cycle volatility, rapid propulsion-technology change, commodity / energy costs and OEM bargaining power. The transition to EVs can expand new powertrain categories but also reduce demand for selected ICE-specific parts, while stringent quality and delivery requirements can create significant warranty and recall exposure.
The Key Risks are:
• Automotive cyclicality: vehicle production, premium-vehicle demand and customer model cycles can change rapidly
• Technology transition: EV architectures may reduce content for some conventional transmission products and require continuing R&D investment
• Input / FX risk: steel, alloy, energy and imported-component costs, together with foreign-currency exposure, can affect margins
• OEM concentration and quality risk: large customers have strong pricing power, and product defects / delivery failures can trigger recalls, penalties or customer loss
Government Policy Support
Indian policy support is primarily indirect through localization, EV adoption, automotive manufacturing incentives and infrastructure / manufacturing investment. These measures expand domestic component demand and encourage technology localization, but benefits depend on the Company's ability to qualify products and win OEM programs.
The Key Policies are:
• Production-linked incentive schemes for automobiles / auto components support localization of advanced automotive technology
• EV-support policies and charging / mobility programs encourage electric two-wheelers and other electrified platforms, expanding demand for electric powertrain components
• Make in India and localization initiatives support domestic sourcing of precision components and reduce import dependence
• Manufacturing capex, R&D and export-promotion measures improve the broader ecosystem for globally competitive component suppliers
Fundraise/Future Plans
Shareholding
Pre-issue shareholding
Promoter Holding 0.0%
Post-Issue Shareholding
Promoter Holding 0.0%
Category
Pre-Issue%Post-Issue%
Promoters
O P Munjal Holdings
71.4%49.8%
Pankaj Munjal
2.5%2.1%
Charu Munjal
0.2%0.2%
Abhishek Munjal
0.2%0.2%
Total Promoter Holding
74.3%52.3%
Additional Shareholders
0.0%0.0%
Total Additional Holding
0.0%0.0%
Total Shareholding
74.3%52.3%
- Overview
- Business
- Financial Highlights
- Industry Overview
- Fundraise/Future Plans
- Documentation
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