Hero Motors is an India-based automotive technology company engaged in designing, developing, manufacturing and supplying highly engineered powertrain solutions to automotive OEMs across the US, Europe, India and ASEAN markets. The company is a fully integrated powertrain systems provider, offering design, prototyping, validation, development and manufacturing capabilities for both electric and non-electric powertrains.

The products cater to diverse applications, including two-wheelers, performance and premium ICE vehicles, e-bikes, off-road vehicles, electric and hybrid cars, heavy-duty vehicles and eVTOL applications. In FY26, the e-bikes segment contributed 12.92% to revenue, motorsport and performance automotive 21.35%, two wheelers 41%, and others 24.73%.

The company operates across two segments: (1) Powertrain Solutions and (2) Alloys & Metallics (A&M). It commenced operations in 2001 with the A&M segment, focusing on sheet metal components, machining of castings and other components, and subsequently entered the powertrain business. It partnered with US-based technology company enviolo to leverage its patented continuous variable planetary transmission (CVP), commonly referred to as CVT in the automotive sector. Hero Motors is the only player in India manufacturing and exporting CVT hubs to global e-bike OEMs.

In FY26, powertrain solutions contributed 53.67% of total revenue, comprising gears &transmission at 41.14% and bike powertrain at 12.53%. Within gears &transmission, EV applications accounted for 10.08% and non-EV applications 31.06%. A&M contributed the remaining 46.33%, largely from non-EV applications at 45.94%, while EV applications accounted for 0.39%.Overall, EV-related products contributed 23% to FY26 revenue, while non-EV products accounted for the remaining 77%.

The company caters to global customers such as BMW, Ducati, enviolo, Formula Motorsport, Hummingbird EV and HWA, along with leading e-bike manufacturers and customers in other mobility applications.In FY26, India contributed 58.64% of revenue, followed by Europe at 33.59%, the US at 3.86% and other markets at 3.91%.

As of March 31, 2026, the company operated six manufacturing facilities across India, the UK and Thailand, strategically located to ensure proximity to customers and cost competitiveness. The Samut Prakan facility in Thailand, operational since FY24, is located close to customers in the ASEAN region, while manufacturing facilities in India are in Gautam Buddha Nagar, Uttar Pradesh and Ludhiana, Punjab.

The company is expanding its portfolio of CVTs, electric motors and integrated electric drive units (EDUs) under the ESYNC brand. Its JV with Yamaha Motor Japan for electric motors under the HYM brand, along with technology centres in Southam, UK and Gautam Buddha Nagar, India, supports product development across automotive and micromobility applications.

The company is expanding beyond motorcycles into new vehicle segments and geographies. It has secured orders for high-precision gear components for hybrid passenger vehicles, gearboxes for electric lawnmowers and complete transmission systems for electric all-terrain vehicles, while pursuing projects in marine, eVTOL, off-road and specialised commercial vehicle applications.

In ASEAN, the Thailand facility supplies fully assembled gearboxes to a European premium two-wheeler OEM and is being positioned as a base to expand its OEM customer network. The acquisition of STPL has also strengthened its capabilities in components for high-end bikes and e-bikes.

The company has entered a non-binding term sheet with a German automotive technology company for a technology license to manufacture dual-clutch transmissions (DCTs), along with engineering and sales support.

The company intends to continue pursuing strategic acquisitions, investments and joint ventures to add new products and technologies, access new customers and markets, improve cost efficiencies and strengthen its existing capabilities.

India‘s motorcycle EV penetration is expected to rise from 2.0% in 2025 to 10.5%-12.5% by 2031, while India‘s electric bike industry is projected to grow at a 19%-23% CAGR between FY26 and FY31. This supports the growth prospects of Hero Motors‘ Bike Powertrain business, which offers CVT systems, electric motors and EDUs.

Offer and its objects

The IPO comprises fresh issue of equity shares worth up to Rs 600 crore and an offer aggregating up to Rs 400 crore by O P Munjal Holdings and Hero Cycle.

The price band for the IPO is Rs 79 to Rs 84 per equity share of face value Rs10 each.

As of July 31, 2026, Hero Motors had total outstanding borrowings of Rs 289.54 crore. The company proposes to use Rs 190 crore from the fresh issue towards repayment/prepayment of certain outstanding borrowings, which should help reduce its debt burden. Another Rs 200 crore will be utilized for capital expenditure, primarily towards purchasing equipment required for capacity expansion at its Gautam Buddha Nagar, Uttar Pradesh facility. The capex is expected to be deployed in phases through FY29. The remaining proceeds will be used to fund inorganic growth initiatives and for general corporate purposes.

The company is also setting up two additional manufacturing facilities in Ludhiana, Punjab and Bengaluru, Karnataka.

The promoters are Pankaj Munjal, Charu Munjal, Abhishek Munjal and O P Munjal Holdings. The promoters and promoter group hold an aggregate of 32,75,40,186 equity shares, aggregating 85.57% of the pre-offer issued and paid-up equity share capital. Their post IPO shareholding is expected to be around 61.63%.

The issue, through the book-building process, will open on 16Sept 2026 and will close on 18 Sept 2026.

Strengths

Offers a diversified, powertrain-agnostic product portfolio, with G&T and A&M products catering to EV, ICE and hybrid vehicles, providing flexibility across evolving vehicle technologies.

Strong technology and specialized powertrain capabilities, with expertise in high-performance, lightweight transmission systems designed to handle high torque while meeting stringent noise, vibration and harshness (NVH) requirements. The company is also the only player in India manufacturing and exporting CVT hubs to global e-bike OEMs, providing a differentiated position in the e-bike powertrain market.

Improving operating margins, with OPM rising from 6.32% in FY24 to 10.21% in FY26, reflecting better cost control and improved operating efficiency.

Long-standing relationships with global OEMs, with the top five customers having an average relationship tenure of over 12 years.

Successful strategic investments and acquisitions have expanded capabilities, with Hewland strengthening expertise in high-performance transmissions, while the Yamaha joint venture and Thailand facility have supported expansion into electric mobility and ASEAN markets.

Robust R&D and product development focus, with R&D expenditure at 7.54% of FY26 revenue. Its in-house testing capabilities support development of new powertrain solutions.

Global manufacturing footprint, with facilities across India, the UK and Thailand, supporting customer proximity and access to key automotive and mobility markets.

Extensive experience of promoters and senior management personnel.

Weaknesses

High customer concentration, as largest customer contributed 35.47% to revenue in FY26.

Exports contributed 41.36% of FY26 revenue, exposing the company to currency fluctuations, overseas demand conditions, trade restrictions and regulatory requirements acrossinternational markets.

High dependence on two-wheeler and e-bike segments, which together contributed around 54% of FY26 revenue, exposing the company to fluctuations in vehicle demand, production volumes, inventory cycles and changes in consumer preferences in these markets.

Expansion across diverse applications and technologies increases execution complexity, with multiple new product programmes requiring significant resources and carrying risks of delays, cost overruns and slower-than-expected scale-up.

Certain subsidiaries have suffered losses in the last three Fiscals.

Future acquisitions and strategic partnerships may not deliver the expected benefits, while also creating integration and execution challenges.

Substantial capital expenditure and working capital requirements could pressure cashflows.

Valuation

Net sales increased 9% to Rs 1,188.35 crore in FY26 as compared with FY25. The OPM improved 173 bps to 10.21%, leading to 31% increase in OP to Rs 121.35 crore. OI also increased 31% to Rs 28.39 crore. Interest cost rose 10% to Rs 40.84 crore. Depreciation cost went up 21% to Rs 45.94 crore. PBT surged 61% to Rs 62.96 crore. Exceptional items were an expense of Rs 1.96 crore compared to nil. Tax expenses were Rs 19.84 crore as compared with Rs 6.28 crore. Minority interest was negative Rs 2.4 crore as compared with positive Rs 7.59 crore. Net profit soared 73% to Rs 43.57 crore.

The FY26 EPS (excluding extraordinary items and relevant tax) on post-issue equity works out to Rs 0.99. At the upper price band of Rs 84, P/E is 85.

Total outstanding borrowings amounted to Rs 289.54 crore as on July 31, 2026. As much as 66% of the debt will be repaid from the issue proceeds, bringing down interest costs substantially and boosting profit. The FY26 EPS works out to Rs 1.39 if 66% of its interest cost is removed, keeping all other items, including tax rate, same. The re-worked P/E at the upper price band moderates to 61.

Listed peers such as Varroc Engineering traded at FY26 P/E of 53, Endurance Technologies trades at FY26 P/E of 39, Sona BLW Precision Forgings trades at FY26 P/E of 74, and UNO Minda at FY26 P/E of 58 as on 10 Sept 2026. The OPM and ROE stood at 10.21% and 8.56% respectively, in FY26. These were 9.33% and 12.64% for Varroc Engineering, 13.47% and 13.91% for Endurance Technologies, 24.3% and 10.26% for Sona BLW Precision Forgings and 11.45% and 17.69% for UNO Minda, respectively.