Hero Motors shelves ₹900 crore IPO plans, withdraws DRHP
What's the story
Hero Motors, one of the top auto component manufacturers, has pulled back its Draft Red Herring Prospectus (DRHP) for the proposed ₹900 crore Initial Public Offering (IPO).
The withdrawal was officially noted on October 5, according to the Securities and Exchange Board of India (SEBI)'s website.
The company, led by Pankaj Munjal, had originally filed the DRHP in August this year.
Pankaj is a first cousin of Hero MotoCorp's chairman Pawan Munjal.
IPO details
IPO structure and fund allocation
The now-canceled IPO was planned to consist of a fresh issue of ₹500 crore and an offer for sale (OFS) of ₹400 crore by promoters OP Munjal Holdings, Bhagyoday Investments, and Hero Cycles.
The net proceeds from this new issue were to be used for debt repayment, capital expenditure for equipment acquisition to increase the Noida facility's capacity, working capital requirements, and general corporate expenses.
Share breakdown
Promoters' share distribution in OFS
While OP Munjal Holdings planned to sell shares worth ₹250 crore through the OFS, Bhagyoday Investments and Hero Cycles were each set to offload shares worth ₹75 crore.
Before filing the Red Herring Prospectus, Hero Motors had contemplated a pre-IPO placement of ₹100 crore.
If realized, the amount would have been deducted from the general corporate purposes allocation of the new issuance.
Company profile
Business and financial performance
Currently, the promoters hold a 91.65% stake in Hero Motors, with OP Munjal Holdings having the majority stake at 71.55%.
The company manufactures engine and transmission components for two-wheelers for global clients such as BMW, Ducati, and Harley-Davidson.
In FY24, nearly half of its revenues came from powertrain solutions (49%) while alloys and metallics (A&M) contributed the remaining 51%.
Geographically, India contributed 59% of FY24 revenue followed by Europe (29%) and the US (8%).
Financial growth
Revenue and profit growth
Hero Motors's operational revenue grew from ₹914.2 crore in FY22 to ₹1,064.4 crore in FY24.
At the same time, the company's gross profit grew from ₹281.4 crore in FY22 to ₹419.4 crore in FY24 at a CAGR of 22%.
This growth was accompanied by the expansion of the gross margin from 30.78% in FY22 to 39.40% in FY24, indicating a strong financial performance despite the IPO withdrawal.