Hero Motors IPO

Hero Motors has built a strong position in the global electric vehicle market, with its e-mobility revenue more than doubling from ₹128.09 crore in FY24 to ₹273.29 crore in FY26. This gives it an early-mover advantage, as it is India’s only exporter of continuously variable transmission hubs - systems that let e-bikes change speed smoothly without fixed gears.

Hero Motors has built strong, long-term relationships with leading vehicle makers, including a 25-year association with Hero MotoCorp, 15 years with a European premium motorcycle maker, 10 years with Ducati, and 7 years with Enviolo. These relationships make it harder for customers to switch suppliers and provide a steady flow of repeat orders.

It operates six manufacturing plants and two technology centres across India, the UK, and Thailand. This global presence helped it generate ₹491.53 crore, or 41.36% of FY26 revenue, from international customers, reducing its reliance on any one regional market.

Hero Motors has improved its profitability at the product level, with gross margin rising from 39.40% in FY24 to 41.69% in FY26, resulting in ₹495.46 crore of gross profit. At the same time, better operating efficiency lifted its EBITDA margin from 8.11% to 12.44%, with EBITDA reaching ₹147.78 crore. This improvement suggests the company is getting better at controlling its manufacturing costs.

Hero Motors puts significant money into developing its own technology, spending ₹89.59 crore, or 7.54% of revenue, on R&D in FY26. Its technology capabilities have also been strengthened by acquiring UK-based Hewland for motorsport transmission design and setting up a joint venture with Yamaha Motors for electric motors.

Hero Motors has exclusive, perpetual manufacturing rights for the “Urban” e-bike transmission developed with Enviolo. Its joint venture with Yamaha Motors also gives it access to advanced Japanese motor technology, helping protect its market position and build products that competitors may find difficult to copy.

Hero Motors depends quite heavily on a small group of customers, with its top 10 clients contributing ₹866.14 crore, or 72.89% of FY26 operating revenue. Even more importantly, its single biggest customer alone contributed ₹422.74 crore, or 35.57% of total sales. So, any meaningful drop in orders from this customer could have a noticeable impact on the business.

A large part of its business depends on demand for two-wheelers and e-bikes, which contributed 41% (₹487.17 crore) and 12.92% (₹153.57 crore) of FY26 sales, respectively. If the industry slows down, government policies change, or buyers shift their preferences, Hero Motors could see a direct hit to its sales and cash flows.

Exports give Hero Motors a wider customer base, but Europe alone accounted for 33.59% of its total operating revenue, or ₹399.22 crore, in FY26. A recession, new regulations, high inflation, or geopolitical tensions in Europe could therefore hurt its export volumes and financial performance.

Hero Motors had total debt of ₹400.79 crore as of March 31, 2026, of which ₹302.02 crore was short-term debt. At the same time, its credit cycle, the time it takes to collect money from customers, increased from 67 days in FY24 to 78 days in FY26, putting more pressure on its working capital and cash position.

Raw materials are Hero Motors’ biggest operating cost, with consumed materials accounting for ₹653.50 crore, or 56.64% of total expenses, in FY26. It also had ₹102.97 crore of unhedged foreign currency exposure. This means a sharp rise in raw material prices or unfavourable currency movements could put pressure on its profit margins.

Hero Motors has significant unused capacity at some of its overseas plants. Its Thailand facility operated at just 3.87% capacity in FY26, producing only 540 parts, while its UK plant operated at 24.19% capacity. Such low utilisation means fixed costs are spread across very few products, putting pressure on profitability and contributing to losses in overseas units such as Hero Motors Thai.

Some of its important subsidiaries were still making losses in FY26, including HYM Drive Systems, which reported a ₹4.91 crore loss, and Hero Thai, which reported a ₹6.67 crore loss. More importantly, HYM’s accumulated losses triggered exit clauses under its joint venture agreement with Yamaha Motors, adding another layer of risk to the company’s partnership.