Can Hero Motors IPO deliver long-term growth for high-risk investors?

Hero Motors, an automotive company founded in 1998, is set to launch an IPO to raise funds for capital expenditure, debt repayment, and strategic investments. The company plans to issue shares valued at ₹600 crore, with the promoter group's stake falling to 61.1% from 84.7%. The IPO will also see an offer for sale amounting to ₹400 crore.

Hero Motors caters to a diverse range of global markets, including the United States, Europe, India, and the Association of Southeast Asian Nations. The company operates through two segments: powertrain solutions and alloys & metallics. Powertrain solutions contributes 54% to revenue, while alloys & metallics make up the remaining 46%.

The EV segment, which includes electric and non-electric vehicles, has seen its revenue share increase from 12% in FY24 to 23% in FY26. This growth is further bolstered by the fact that nearly 41% of the revenue comes from international markets, with 36% coming from the company's top customer and 73% from its top 10 clients. This concentration of revenue among a select group of clients signals potential risk for investors.

Despite these factors, investors with a high-risk appetite may consider the IPO. Financially, Hero Motors has shown steady growth from FY24 to FY26. Revenue from operations increased by 5.7% annually, reaching ₹1,188.4 crore, while net profit surged 55.5% to ₹41.2 crore. The operating margin before depreciation and amortization (EBITDA margin) improved to 12.4% from 8.1%.

Net debt increased to ₹428.2 crore in FY26 from ₹245.7 crore in FY24, though the net debt-EBITDA ratio remained at around 2.9, indicating profitable deployment of borrowed funds.