The Hero Motors IPO explained

Saad (0:01)

Hello folks, you're tuned in to Finshots Daily. I'm Saad, if you're new here, welcome. And if you're returning, welcome back. In today's episode, we walk you through the Hero Motors IPO, which opens for subscription today, and will remain open until September 18th.

Before we head to the story, here's a quick word from Team Ditto. We're hosting a free two-day insurance masterclass that helps you build real financial security by understanding health and life insurance the right way. Right from understanding how to protect your family, choosing the right cover amount, and knowing what truly matters during a claim, to how hospitals process claims, the mistakes buyers usually make, and how to choose a policy that won't disappoint you when you need it the most. We will explain it all in plain language. Head to the link in the description and save your spot. Now to the story. When the Hero Motors IPO opens for subscription today, it's easy to assume that you already know the company behind it.

After all, the word Hero has been part of Indian roads and households for decades thanks to Hero Motor Corp. But Hero Motors and Hero Motor Corp are no longer part of the same business. Sure, they share a family history through the Munjal family, and Hero Motor Corp happens to be one of Hero Motors' top 10 customers.

But that's about it. That's where the connection ends. So how did two companies with the same Hero name end up on opposite sides of the business relationship, you ask? For that, we need to go back to 2010 That was when the Munjal family ended its 27-year joint venture with Honda, and decided to divide its wider business empire among four branches of the family. Brij Mohanlal, Sathyanand, Om Prakash and Dayanand. More than 20 group companies that family had once co-owned were split up, with each branch taking outright ownership of the businesses it managed. Brij Mohanlal Munjal's branch retained the flagship two-wheeler business, which became Hero Motor Corp under his son Pawan Munjal. His brother Om Prakash Munjal's branch, meanwhile, took control of Hero Cycles, Hero Motors and Munjal Sales Corporation. That branch is now led by Om Prakash's son, Pankaj Munjal, who is the lead promoter of the Hero Motors IPO. A third branch took Hero Exports and Hero Electric. There was just one thing that the family didn't split up, the name. Under a trademark and name-sharing agreement, each branch retained the right to use Hero for its businesses. For Hero Motors, that right continues, as long as Pankaj Munjal's family owns at least 26% of the company. And that's exactly why you can still find the name Hero across businesses that now have separate owners and separate balance sheets. But today, there's one specific hero we're interested in. Hero Motors.

So let's understand its business.

Although incorporated earlier, Hero Motors began commercial operations in 2001, making sheet metal parts and castings. But over the next two decades, it grew into a much broader business. Today, its business can be broadly divided into two main parts. First is its original alloys and metallics or A&M business, which makes sheet metal and cast components and contributes to 46% of its revenue. And the other is its powertrain solutions business, which makes components that help transfer power to a vehicle's wheels, such as CVT, Continuously Variable Transmission Systems, electric motors, etc. and contributes to 54% of the revenue. The second segment has two parts, Gears and Transmissions or G&T, which makes transmission systems for two-wheelers, cars, commercial vehicles, and off-road vehicles. And Bike Powertrain or BPT, which makes components for micro-mobility vehicles such as e-scooters, bicycles, and e-bikes used for short-distance travel. The company has also expanded beyond India through a series of acquisitions and partnerships. For instance, in 2022, it bought a stake in British transmission specialist, Hewland Engineering.

This gave Hero Motors access to Hewland's design and testing capabilities, as well as a manufacturing base in the UK. It also partnered with Yamaha Motor Japan in 2021 to make electric motors under the HYM brand and acquired Spur Technologies in 2023 to strengthen its presence in premium motorcycle and e-bike components. By March 2026, Hero Motors had six manufacturing facilities across India, the UK and Thailand, along with two technology centers. India still accounted for the bulk of its business, contributing to about 59% of its revenue in FY26.

Europe contributed another 34%, with the rest coming from the US and other markets. That brings us to how the business has actually been doing. Although slowly, Hero Motors' revenue has been growing.

It went from 1,064 crore rupees in FY24 to 1,090 crore rupees in FY25, and then to 1,188 crore rupees in FY26. So while growth has been modest in the first two years, it picked up about 9% in FY26. More importantly, the company has become profitable. Its gross margin improved from 39.4% in FY24 to 41.7% in FY26.