In the coming days, the stock market will have two Hero companies trading in the auto space, but don’t let the name confuse you. Hero MotoCorp, the two-wheeler giant, is led by Pawan Munjal and is one of the most-tracked auto stocks. Now Hero Motors, an auto component manufacturer led by cousin Pankaj Munjal’s side of the family, is coming to the market with a ₹1,000 crore IPO. The similar names can be confusing. But the businesses are very different.
Hero MotoCorp makes motorcycles and scooters. Hero Motors manufactures vehicle components, including powertrain components, gears, and e-mobility products. The two businesses have operated separately following the Munjal family settlement. So, while the Hero name is common, investors should look at them as very different businesses.
The bigger question for the Hero Motors IPO, however, is not the name. It is whether the company's growth and profitability can justify the valuation being asked from investors.
#Hero Motors IPO Timeline And Key Details
#What Does Hero Motors Actually Do?
Hero Motors is an automotive technology company focused on powertrain solutions for both electric and internal combustion engine (ICE) vehicles. It designs, develops, and manufactures components and complete powertrain systems, including gears, transmissions, electric motors, and integrated drive units.
Its products are used across two-wheelers, performance vehicles, e-bikes, off-road vehicles, electric and hybrid cars, heavy-duty vehicles, and emerging applications such as electric vertical takeoff and landing (eVTOL). The company supplies global OEMs, including BMW and Ducati, as well as leading e-bike manufacturers.
The company’s business is organised into two segments: Powertrain Solutions, which comprises Gears & Transmissions and Bike Powertrain, and Alloys & Metallics, which supplies sheet-metal and tubular assemblies to automotive OEMs. Nearly 40% of the revenue comes from international markets.
For investors, the key point is that Hero Motors is not simply an auto component manufacturer. It is trying to move up the value chain by offering technology-led, system-level powertrain solutions across both ICE and EV platforms.
#Hero Motors Financials: Growth is Improving, But From a Low Base
#Hero Motors Financial Performance
Source: Hero Motors RHP
Consolidated revenue from operations increased about 9.1% in FY26 to ₹1,188 crore, while net profit increased 25.5% to ₹41.2 crore. The gross margin trend has improved for the second consecutive financial year, reaching 41.7%, indicating an improvement in the company’s gross profitability.
That is a positive trend. More importantly, profit growth has outpaced revenue growth, suggesting some improvement in operating performance. But there is another number worth watching: debt.
As of 31st March 2026, the borrowings were around ₹401 crore, of which ₹302 crore is payable within one year. The fresh issue is partly intended to fund debt repayment and capacity expansion, which could strengthen the balance sheet and potentially improve return ratios over time.
#Return on Capital
Source: Hero Motors RHP
#What Will the IPO Money Be Used For?
Hero Motors will raise ₹600 crore through the fresh issue, while the remaining ₹400 crore is an offer-for-sale to selling shareholders.
The fresh issue proceeds will mainly be used for two purposes:
- ₹190 crore will go towards repayment and part-prepayment of outstanding borrowings and accrued interest.
- ₹200 crore will be used for the purchase of machinery and capacity expansion
The remaining amount will be used for general corporate purposes and funding inorganic growth.
#Hero Motors IPO Valuation
At the upper end of the price band at ₹84, Hero Motors is asking investors to pay around 92.7x FY26 earnings. At the lower band of ₹79, the valuation works out to about 87.2x.
This is based on FY26 PAT of ₹41.17 crore and a post-issue share count of 45.42 crore shares, resulting in an FY26 EPS of around ₹0.91. Compared with other auto component manufacturers, Hero Motors' IPO is coming at a premium valuation.
#Valuation Comparison with Peers
*Q2CY2026
Data as of 14th August 2026
The interesting part is that Hero Motors does not have a huge profitability advantage to support this premium. Its FY26 EBITDA margin of 13.5% is better than UNO Minda and Varroc Engineering, but below CIE Automotive and Endurance Technologies, and well below Sona BLW.
Yet, at 92.7x earnings, Hero Motors is valued at a much higher multiple than all of them.
This is where the IPO valuation becomes demanding. Investors are effectively paying a premium today for the company's expected earnings growth, EV powertrain opportunities, and improved profitability. The market is waiting for those numbers to catch up with the valuation.
#What Works in Hero Motors' Favour?
#Diversified customer exposure: The company supplies components across two-wheelers, passenger vehicles, and commercial vehicles, and has exposure to both ICE and EV platforms.
#Engineering capabilities: Hero Motors has decades of manufacturing and engineering experience, which can be valuable as OEMs increasingly seek specialised component suppliers.
#Improving profitability: Profit has grown strongly over the last two years, even though it is still coming from a relatively small base.
#Deleveraging opportunity: A portion of the proceeds from the fresh issue will be allocated to debt reduction. Lower interest costs and a stronger balance sheet could support profitability going forward.
#EV opportunity: Its e-mobility and powertrain businesses allow it to participate in the transition towards electric vehicles rather than being entirely dependent on the legacy ICE market.
#What Should Investors Watch?
#Valuation remains the biggest concern: At around 92x FY26 earnings, Hero Motors has limited room for disappointment. Any slowdown in revenue growth or margin contraction can directly impact the stock price.
#Growth is not yet exceptional: FY26 revenue growth of around 9.1% is healthy, but it does not by itself justify such a large valuation premium.
#Debt remains relevant: Borrowings have remained around ₹400 crore despite improved profitability. The impact of the IPO proceeds on leverage and interest costs will therefore be worth tracking.
#Customer concentration: Hero Motors remains dependent on a relatively small group of customers. Its top 10 customers contributed 72.89% of revenue in FY26, while its largest customer accounted for 35.57%. A reduction in orders or the loss of a key customer could therefore affect the company’s revenue and profitability
#Auto remains a cyclical business: OEM production, raw-material costs, and changes in vehicle demand can all affect component manufacturers.
#The EV transition cuts both ways: Electric vehicles create a new opportunity for powertrain and e-mobility components, but they can also make some existing ICE-related products less relevant over time.
#Hero Motors IPO: Bottom Line
Auto component manufacturers are benefiting from the China+1 shift and strong EV tailwind. Hero Motors is benefiting from the same structural shift as it strengthens its exposure to both ICE and EV powertrains. But the IPO comes at a steep valuation.
At 92.7x FY26 earnings, investors are already paying a high price for the company's future growth. Its 13.5% EBITDA margin is decent but not significantly better than that of many listed peers, justifying the premium.
So, the key question is simple: can Hero Motors grow its earnings fast enough to justify the valuation? The business has the opportunity, but at this price, investors will need to see the numbers catch up.
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