South Asia Growth Invest-backed Hero Motors files draft papers for Rs 900 crore IPO

Hero Motors IPO

South Asia Growth Invest-backed Hero Motors, the flagship auto-components company of the Hero Motors Company (HMC) Group, has filed draft red herring prospectus with capital markets regulator SEBI to raise Rs 900 crore via initial public offering.

The public issue is a combination of fresh issuance of equity shares worth Rs 500 crore, and an offer-for-sale (OFS) of Rs 400 crore worth shares by promoters, according to the DRHP filed on August 23.

Promoter O P Munjal Holdings will be selling Rs 250 crore worth shares in the OFS, and other promoters Bhagyoday Investments, and Hero Cycles will be offloading Rs 75 crore each worth of holding in the OFS.

The company may also consider a pre-IPO placement of Rs 100 crore prior to filing of the Red Herring Prospectus with the Registrar of Companies (ROC). If it manages to complete the pre-IPO placement, the said amount will be reduced from the general corporate purposes portion of the fresh issue.

O P Munjal Holdings owns 71.55 percent stake (on a fully diluted basis) in Hero Motors. Bhagyoday Investments, and Hero Cycles hold 6.28 percent and 2.03 percent shares, respectively, while investor South Asia Growth Invest LLC has 12.27 percent shareholding in the company.

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Hero Motors, one of India’s leading automotive technology companies, provides powertrain solutions (both electric as well as non-electric powertrains) to automotive original equipment manufacturers (OEMs) in United States, Europe, India and the Association of Southeast Asian Nations (ASEAN) region. Its customers are from the two-wheelers, e-bikes, off-road vehicles, electric and hybrid cars, heavy duty vehicles, and electric vertical take-off and landing (eVTOL) categories, in the automotive segment.

It supplies powertrain solutions to global customers such as BMW AG, Ducati Motor Holding SPA, Enviolo International Inc, Formula Motorsport, HUMMINGBIRDEV Inc), HWA AG, and leading global electric bicycle (e-bike) manufacturers.

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The Pankaj Munjal-owned company, the only player manufacturing and exporting CVT hubs to global e-bike OEMs from India, and the only manufacturer of integrated electric powertrain products for e-bikes in India, operates in two segments - powertrain solutions, and alloys and metallics, with six manufacturing facilities in India, United Kingdom and Thailand.

Powertrains are integrated systems designed to propel a vehicle by converting energy into motion, including the engine or motor, energy storage systems, the transmission, driveshaft, and other related components that work together to deliver power to the vehicle's wheels, while the alloys and metallics segment provides sheet metal and tubular assemblies and component solutions, primarily to automotive OEMs.

Hero Motors that earned nearly 59 percent business from India and 29 percent from Europe recorded profit at Rs 17 crore for the year ended March 2024, lower by 58 percent compared to Rs 40.5 crore profit in the previous year, with muted growth in topline, lower operating performance and higher employee cost.

Revenue during the year at Rs 1,064.4 crore increased by 0.9 percent over Rs 1,054.6 crore in the previous year. EBITDA (earnings before interest, tax, depreciation and amortisation) fell 23.7 percent to Rs 63.8 crore with margin declining 190 bps to 6 percent despite lower input cost.

ICICI Securities, DAM Capital Advisors, and JM Financial are the book running lead managers to the issue.