Hero Motors IPO Draws Demand as EV Growth Meets High Valuation
Hero Motors’ ₹1,000-crore initial public offering is drawing investor interest as the automotive components maker seeks to turn its growing electric-vehicle business into a larger source of future revenue. The issue opened on September 16 and is scheduled to close on September 18, with a price band of ₹79 to ₹84 per share. At the upper end, the company is valued at about ₹3,815 crore.
The IPO was subscribed 1.39 times on its first day, according to exchange-linked data cited by Reuters and market trackers. Retail investors accounted for much of the early demand, while qualified institutional buyers had bid for only a small portion of their allocation on day one.
That early demand comes against a more complicated financial picture. Hero Motors is growing quickly in electric-vehicle components, but overall revenue growth has been modest, and the company is seeking a valuation that leaves relatively little room for operational disappointments.
EV business is driving the growth
Hero Motors operates across powertrain solutions and conventional automotive components. Its Powertrain Solutions segment accounted for 53.7% of FY26 revenue, while the Alloys & Metallics business contributed the remaining 46.3%. The company serves customers in 23 countries, with international customers accounting for 41.4% of revenue in FY26.
The clearest growth is coming from electric mobility.
Hero Motors’ EV revenue increased to ₹273 crore in FY26 from ₹176 crore a year earlier and ₹128 crore in FY24. That represents 55.6% growth in FY26 and a two-year compound annual growth rate of 46.1%. EV-related revenue also increased its share of total sales to about 23% from 12% in FY24.
By comparison, non-EV revenue was ₹915 crore in FY26, almost unchanged from ₹914 crore in FY25 and below ₹936 crore in FY24.
That difference matters because almost all of Hero Motors’ additional revenue in FY26 came from EV products. Total revenue increased by roughly ₹99 crore during the year, while EV revenue increased by about ₹98 crore.
The company is therefore increasingly dependent on the expansion of its electric-mobility business to accelerate overall growth.
Margins are improving, but the business is uneven
Hero Motors’ Powertrain business has also been improving financially.
Powertrain revenue rose 19.4% in FY26 to ₹637.8 crore, while segment profit increased 54% to ₹104.1 crore. Its segment margin improved to 16.3% from 12.6% in FY25.
The Alloys & Metallics business tells a different story. Revenue was broadly flat at ₹550.6 crore in FY26, but the segment moved from a ₹6.2-crore profit in FY25 to a ₹15.9-crore loss.
Hero Motors’ overall revenue increased only 5.7% on a two-year compound basis, to ₹1,188 crore in FY26. EBITDA rose to ₹147.8 crore, while profit after tax increased to ₹41.2 crore from ₹32.8 crore in FY25 and ₹17 crore in FY24.
The improvement in reported profit therefore has to be viewed alongside the relatively slow revenue expansion and weakness in part of the conventional-components business.
IPO proceeds will reduce debt and expand capacity
The IPO consists of a ₹600-crore fresh issue and a ₹400-crore offer for sale by existing shareholders. Hero Motors plans to use part of the fresh proceeds to repay debt and invest in its Powertrain manufacturing capacity.
According to the company’s offer documents, ₹190 crore is earmarked for debt repayment and ₹200 crore for expansion of Powertrain capacity at its Gautam Buddha Nagar facility. The company has also identified acquisitions and general corporate purposes among the uses of proceeds.
The Gautam Buddha Nagar Powertrain facility was operating at 88.3% utilisation in FY26, supporting the case for additional capacity. At the same time, some overseas and newer facilities remain underutilised. Value Research noted that utilisation at the Thailand operation fell to 3.9% in FY26 from 12% in FY24, while the UK operation stood at 24.2%.
The challenge for investors is whether the additional investment can translate into enough volume and profit to improve returns across the wider business.
Valuation is the central issue
At the upper IPO price of ₹84, Hero Motors is valued at about ₹3,815 crore. Based on FY26 earnings, Value Research calculated a price-to-earnings ratio of about 92.7 times.
That is a substantial valuation relative to the company’s recent earnings base.
Value Research compared Hero Motors with several listed auto-component companies and calculated a peer median P/E of roughly 46.7 times. Its analysis noted that Hero Motors’ valuation therefore represents a significant premium despite its comparatively modest return on equity.
The premium is closely tied to expectations for the company’s Powertrain and EV businesses. If EV revenue continues to grow rapidly and the higher-margin Powertrain business expands, earnings could improve. But the IPO valuation assumes meaningful progress.
Moneycontrol similarly pointed to EV growth and Hero Motors’ international customer base as positives while highlighting modest overall financial growth and customer concentration as risks.
Subscription demand adds another layer
The IPO’s first-day response was strong enough to fully cover the shares on offer. Reuters reported that the issue received bids for 95.3 million shares by 2:40 p.m. IST on September 16, representing 1.08 times the shares on offer at that point. Retail investors were the strongest category during the initial session.
By the end of the first day, market data showed the issue was subscribed about 1.39 times overall, with the retail portion at 2.23 times and the non-institutional category at 1.25 times. The QIB portion stood at 0.01 times after day one.
Grey-market premiums have also been reported by market publications, but GMP is unofficial and unregulated and does not guarantee the eventual listing price. It is therefore separate from the company’s fundamentals and the formal IPO price discovery process.
What investors are weighing
Hero Motors presents two distinct stories.
The first is the growth story: EV revenue is expanding rapidly, Powertrain margins are improving, and the company is investing in additional capacity. The second is the valuation story: overall revenue growth remains moderate, the Alloys & Metallics division is loss-making, some facilities are underutilised, and the IPO price implies a high earnings multiple.
The company’s own offer-document materials also warn investors that equity investment carries a high degree of risk and advise potential investors to base their decisions on the red herring prospectus and price-band advertisement rather than online commentary or social-media sources.
The IPO remains open through September 18. Shares are expected to be listed on the NSE and BSE on September 23, subject to the IPO timetable.
For the market, the key question is not whether Hero Motors has an EV growth opportunity. Its recent numbers show that it does. The harder question is whether that growth can expand fast enough, and profitably enough, to support the valuation investors are being asked to accept today.
