In today’s Finshots, we walk you through the Hero Motors IPO, which opens for subscription today and will remain open until September 18th.

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Now, on to today’s story.

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 MotoCorp.

But Hero Motors and Hero MotoCorp are no longer part of the same business. Sure, they share a family history through the Munjal family, and Hero MotoCorp happens to be one of Hero Motors’ top ten 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 a 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: Brijmohan Lall, Satyanand, Om Prakash and Dayanand.

More than 20 group companies that the family had once co-owned were split up, with each branch taking outright ownership of the businesses it already managed. Brijmohan Lall Munjal’s branch retained the flagship two-wheeler business, which became Hero MotoCorp 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 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 own businesses. For Hero Motors, that right continues as long as Pankaj Munjal’s family owns at least 26% of the company.

Sidebar: The promoters and promoter group currently hold about 85% of the company, which will fall to about 62% after the IPO.

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 (A&M) business, which makes sheet-metal and cast components and contributes to 46% of the 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.

This second segment has two parts: Gears & Transmissions (G&T), which makes transmission systems for two-wheelers, cars, commercial vehicles and off-road vehicles; and Bike Powertrain (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 centres. India still accounted for the bulk of its business, contributing about 59% of its revenue in FY26. While 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 in FY24 to ₹1,090 crore in FY25 and then to ₹1,188 crore in FY26. So, while growth was modest in the first two years, it picked up to about 9% in FY26.

More importantly, the company has become more profitable. Its gross margin improved from 39.4% in FY24 to 41.7% in FY26. Its EBITDA margin also rose from 11.8% to 13.5%. And net profit margin more than doubled from 1.6% to 3.5%. In simple terms, Hero Motors made more money from every rupee of revenue in FY26 than it did two years earlier.

Then there’s the debt. As of July, Hero Motors had about ₹427 crore of borrowings on a standalone basis. Its net debt compared with its EBITDA also increased from 1.72 times in FY24 to 2.79 times in FY25, before coming down to 2.24 times in FY26. So you could say that despite taking on more debt, the company’s earnings improved enough in FY26 to bring this ratio down.

And this is where the IPO money comes in. The IPO will raise ₹1,000 crore, of which ₹600 crore will be a fresh issue. Hero Motors plans to use around ₹190 crore of this fresh money to repay some of its existing debt. The rest will go towards expanding powertrain capacity, other capital expenditure, acquisitions that haven’t been identified yet, and general corporate purposes.

But before investors decide whether that sounds like a good use of the money, there’s another question: what are they being asked to pay for the business?

Well, at the upper price band of ₹84 per share, and based on its FY26 earnings of ₹1.14 per share, the IPO is valued at about ₹3,815 crore or roughly 74 times its earnings. On an EV-to-EBITDA (enterprise value as compared to the cash operating profit) basis that works out to 25 times.

That may sound expensive, but it’s not completely out of line with the companies Hero Motors is being compared with: CIE Automotive India, Endurance Technologies, Sona BLW Precision Forgings, UNO Minda and Varroc Engineering. Their valuations range from about 18 times earnings for CIE Automotive India to 77 times for Sona BLW. Endurance, UNO Minda and Varroc fall somewhere in between, at roughly 41–60 times earnings. So, at 74 times earnings, Hero Motors would sit towards the expensive end of this group, closer to Sona BLW.

But the important thing to note here is that these companies are much larger than Hero Motors. For context, their FY26 revenues ranged from around ₹8,900 crore for Varroc to nearly ₹19,700 crore for UNO Minda.

Hero Motors, by comparison, earned a revenue of just ₹1,188 crore. Its profitability is also lower. And its return on net worth was about 8.5% in FY26, compared with 11% to nearly 20% for these five peers.

So investors are being asked to pay a relatively high price for a much smaller company. The bet, presumably, is that Hero Motors can continue growing and become a much larger player over time.

But whether that bet pays off is still an open question. Look a little closer at the financials and you’ll see why. While the Powertrain business is improving, its A&M segment is still struggling. In fact, it is loss-making.

So, at this point, it seems like the market has already priced in much of the improvement investors are hoping to see. Whether Hero Motors can grow into that valuation and deliver some truly heroic results will only become clear over the next few years.

Until then…

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