Hero Motors, a leading Indian auto component manufacturer, has refiled its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for its upcoming Initial Public Offering (IPO). The company has increased the total issue size to ₹1,200 crore, up from the ₹900 crore proposed in its previous filing. This move reflects Hero Motors’ evolving capital needs and its focus on strengthening its position in the automotive technology sector.
The revised IPO consists of a fresh issue of shares worth up to ₹800 crore and an offer for sale (OFS) by existing shareholders totaling ₹400 crore. The equity shares will be listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The company will determine the price band and minimum bid lot in consultation with the book-running lead managers, which include ICICI Securities, DAM Capital Advisors, and JM Financial. KFin Technologies has been appointed as the registrar for the issue.
Reducing Debt and Expanding Manufacturing Capacity:
Hero Motors plans to utilize the net proceeds from the IPO to strengthen its balance sheet and support its growth ambitions. Of the ₹800 crore fresh issue, ₹285 crore will go towards repayment or prepayment of certain outstanding borrowings, helping the company reduce its debt burden. Another ₹237 crore is earmarked for the purchase of equipment to expand the manufacturing capacity at its Gautam Buddha Nagar facility in Uttar Pradesh.
The remaining funds from the IPO will be allocated for inorganic growth opportunities, including potential acquisitions and other strategic initiatives, as well as for general corporate purposes. This capital allocation strategy is aimed at enhancing Hero Motors’ manufacturing capabilities and supporting future expansion in both domestic and international markets.
Global Clientele and Revenue Growth:
Hero Motors is a key player in the auto component and mobility solutions space, operating as part of the larger Hero Group. While Hero MotoCorp is known for its two-wheeler manufacturing, Hero Motors specializes in advanced automotive components, particularly drivetrain systems such as gearboxes and transmission assemblies. The company supplies components to prominent global original equipment manufacturers (OEMs) including BMW, Ducati, and Harley-Davidson, and has manufacturing facilities in India, the UK, and Thailand.
In the financial year 2024, Hero Motors derived 49% of its revenue from powertrain solutions, with the remaining 51% coming from its alloys and metallics business segment. Geographically, 59% of its revenue came from India, 29% from Europe, and about 8% from the US. The company’s revenue from operations grew from ₹914.2 crore in FY22 to ₹1,064.4 crore in FY24, while gross profit increased from ₹281.4 crore to ₹419.4 crore during the same period. Gross margins improved from 30.78% in FY22 to 39.40% in FY24, indicating strong operational performance and efficiency gains.
Shareholding Structure and IPO Allocation:
As of the latest filing, the promoters of Hero Motors hold a 91.65% stake in the company. The OFS component of the IPO will see OP Munjal Holdings sell shares worth ₹390 crore, while Bhagyoday Investments and Hero Cycles will each offload shares worth ₹5 crore. The IPO structure ensures balanced participation: not more than 50% of the issue is reserved for qualified institutional buyers (QIBs), at least 15% for non-institutional investors (NIIs), and 35% for retail individual investors.
Hero Motors’ decision to increase its IPO size and refile with SEBI signals confidence in its growth trajectory and market prospects. The company’s focus on reducing debt, expanding manufacturing, and exploring strategic acquisitions positions it well for future opportunities in the rapidly evolving automotive sector. The IPO is set to provide the company with the necessary capital to accelerate its expansion plans and reinforce its standing as a global supplier of advanced automotive components.
