August 24, 2024
New Delhi, India
Upcoming IPO
Hero Motors, an auto-components company under the Hero Motors Company (HMC) Group, has taken a significant step toward going public. The company, backed by South Asia Growth Invest, filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on August 23, 2024. Through this initial public offering (IPO), Hero Motors aims to raise ₹900 crore from the Indian primary market.
IPO Details: As per the DRHP, the upcoming IPO will consist of a fresh equity issuance of ₹500 crore and an offer-for-sale (OFS) of ₹400 crore worth of shares by the company’s promoters. Specifically, Promoter OP Munjal Holdings plans to offload shares worth ₹250 crore, while Bhagyoday Investments and Hero Cycles will each sell shares worth ₹75 crore through the OFS.
Hero Motors may also explore a pre-IPO placement of ₹100 crore before filing the Red Herring Prospectus with the Registrar of Companies (ROC). If this placement materializes, the proceeds will reduce the allocation for general corporate purposes from the fresh issue, as indicated in the report.
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Ownership and Stakeholders: Currently, OP Munjal Holdings owns a 71.55% stake in Hero Motors on a fully diluted basis. Bhagyoday Investments and Hero Cycles hold 6.28% and 2.03% stakes, respectively, while investor South Asia Growth Invest LLC has a 12.27% shareholding in the company.
Business Overview: Hero Motors is a leading provider of powertrain solutions, offering both electric and non-electric powertrains to automotive original equipment manufacturers (OEMs) across the United States, Europe, India, and the ASEAN region. The company caters to a diverse clientele, 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.
Hero Motors boasts a global customer base that includes prestigious 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.
Financial Performance: Hero Motors reported a net profit of ₹17 crore for the fiscal year ending March 2024, representing 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. Additionally, 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.
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