Electric E2W manufacturer Hero Electric to go public by FY26: CEO

To target 2 million vehicle sales before listing

Electric two-wheeler (E2W) manufacturer Hero Electric is planning to get publicly listed on the Indian stock exchanges in the next two years, Sohinder Gill, chief executive officer, Hero Electric, informs Business Standard. 

However, before going public by the end of 2025-26, the company aims at expanding its market share and targets 2 million vehicle sales. The company sold 100,000 vehicles in 2022-23.

“This (listing) is an inevitable step, but it has to have a run and time of its own. When we reach 2 million unit sales, that is the time public offerings are better,” says Gill, adding, “We believe in proving and then drawing with a track record, and it will come in two years.”

To drive the exponential growth needed to achieve the target, the E2W manufacturer is banking on a capital expenditure (capex)-light model in business and products, along with fundraising. The company is looking to raise funds from both equity and debt sources.

Although the company had a plan to raise Rs 2,000 crore by September this year, the deadline for the fundraising has been extended to a full year because of the ongoing localisation probe by the Ministry of Heavy Industries.

“Our priority will be strategic equity investors and then debt. The deadline for our Rs 2,000-crore fundraiser has shifted to a full year now,” says Gill, adding, “Our strategy is to wait for this stigma and negativity in the market to improve. We don’t want to waste the valuation due to the current state of Cloud. We should be out of it, and then we get what we deserve.”

So far, Hero Electric has raised a total of Rs 380 crore in funding. In December 2018, the company raised Rs 160 crore in its first-ever fundraising exercise. Through an equity sale, the company sold a minority stake to Alpha Capital Advisors. In July 2021, it raised Rs 220 crore in a Series B funding from Gulf Islamic Investments LLC.

Hero Electric came under fire since its name came up in the ministry’s investigation of companies that did not comply with the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME II) scheme’s Phased Manufacturing Programme (PMP) guidelines.

In April, the ministry concluded in its report that there had been rampant use of imported parts — a clear violation of the PMP guidelines, allegedly by Hero Electric and Okinawa Scooters. The government also asked the company to repay the Rs 133 crore it had claimed in subsidies since 2019 and barred it from future FAME incentives.

The ministry also halted subsidies to the tune of Rs 600 crore, pending since September 2022.

Although Gill says the company “might think of taking the amount as a liability if worse comes to worst”, he believes a solution is near at hand.

As soon as the government disburses the suspended subsidy of Rs 600-700 crore, everything else will fall into place, says Gill. The proposed Rs 2,000-crore fundraising may well be reduced since the company has taken on a capex-light model with its strategic partnerships and committed investments.

“Our production capacity is acceptable; new models are already out, and two new models will roll out next year. With a five-model line-up, the investment in models is gone, and the investment in capacity already lined up. What else do I need? I might need funds for working capital, marketing, and research and development in the future, but they can wait a few months more,” says Gill.

Hero Electric has a production capacity of upwards of 200,000 vehicles. Last year, it tied up with Mahindra Group for another 200,000. The company will also start construction on its Rajasthan plant, which will purportedly have a production wherewithal of 1.3 million to 1.5 million units, he adds.

On the question of a decline of more than 75 per cent in sales in April since a record high in March 2022, Gill says it is a “planned absence from the market”.

“We have started production, but it has not been felt in the market as our market share is still going down. We have a run of a few months to prove that we can come back even stronger than before and then command and demand what we deserve. This brand with a decade-plus presence and this kind of strength and customer base can get the best of valuations,” adds Gill.