Hero Motors Limited

Sector: Automotive Technology / Auto Components — Powertrain Solutions & Alloys and Metallics

1. Overview

Hero Motors Limited is one of India's leading automotive technology companies, engaged in designing, developing, manufacturing and supplying highly engineered powertrain solutions to automotive original equipment manufacturers (OEMs) across the United States, Europe, India and the ASEAN region. The Company traces its roots to 1998 and operates as a fully integrated powertrain systems provider, offering design, prototyping, validation and manufacturing services for both electric and non-electric powertrains.

The Company's operations are organized into two business segments: Powertrain Solutions (comprising Gears & Transmissions and Bike Powertrain sub-units) and Alloys & Metallics (A&M). For Fiscal 2026, Powertrain Solutions contributed 53.67% of revenue from operations (₹6,377.53 million) and A&M contributed 46.33% (₹5,505.98 million), reflecting a shift toward the higher-growth powertrain business from a roughly even split in Fiscal 2024.

Geographically, the Company generated 58.64% of Fiscal 2026 revenue from India, 33.59% from Europe (including the UK), 3.86% from the United States, and the balance from other ASEAN and international markets. It operates six manufacturing facilities — three in Ludhiana and Gautam Buddha Nagar (India), one each in the United Kingdom (Hewland, Maidenhead) and Thailand (Samut Prakan) — supported by two dedicated technology centers in Southam (UK) and Gautam Buddha Nagar (India). Two additional facilities are under construction in Ludhiana and Bengaluru.

The Company counts BMW, Ducati, Hero MotoCorp, Formula Motorsport, HWA AG, enviolo and Escorts among its global customer base, and holds a distinctive position as the only Indian manufacturer exporting CVT hubs to global e-bike OEMs and the only manufacturer of integrated electric powertrain products for e-bikes in India (Source: CRISIL Report).

2. Business Model and Revenue Streams

Revenue by Segment

Revenue by Geography (FY2026)

Revenue by Powertrain Type

The e-mobility (EV) contribution to revenue has grown sharply — from 12.03% in FY2024 to 16.12% in FY2025 and 23.00% in FY2026 — reflecting the Company's strategic pivot toward electrified powertrain solutions as global two-wheeler and e-bike electrification accelerates.

Customer Concentration and Contracts

The Company's top 10 customers contributed 72.89%, 78.03% and 76.96% of revenue from operations in Fiscals 2026, 2025 and 2024 respectively — a meaningful but slightly reducing concentration. Customer relationships are built through the request-for-quotation (RfQ) process, with the Company noting that switching costs for OEM customers within the powertrain industry are typically significant, supporting long-duration relationships once contracts are secured.

Supplier Base

Raw material procurement is similarly concentrated: the top 10 suppliers accounted for 20.85%, 21.82% and 21.52% of total cost of raw materials consumed in Fiscals 2026, 2025 and 2024 respectively, with no single supplier contributing more than 50% — indicating a moderately diversified sourcing base without single-vendor dependency.

3. Products and Service Portfolio

Gears & Transmissions (G&T)

The Company offers full-value-chain transmission solutions — design, development, prototyping, validation and volume supply — for two-wheelers, passenger cars, commercial vehicles, aerospace, marine, off-road vehicles, lawnmowers and specialty EVs. The 2022–23 acquisition of Hewland (UK-based motorsport and performance-vehicle gearbox specialist) significantly expanded design and prototyping capability, adding manual and sequential gearboxes, differential units and drivetrain components to the portfolio.

Bike Powertrain (BPT)

Focused exclusively on the micro-mobility segment (e-bikes, e-scooters), this unit is built around three core product lines:

1. CVT Hubs — based on enviolo's patented continuous variable planetary transmission (CVP) technology; the Company is the only Indian manufacturer exporting CVT hubs to global e-bike OEMs, with variants spanning City, Cargo & Sporty, Heavy Duty, Extreme Gearbox, Modular and Trekking use cases.
2. Electric Motors — 36V motors co-developed with Yamaha Motors Japan (Platform X, with X+ and Z variants), offering higher torque, efficiency and thermal protection.
3. Electric Drive Units (EDUs) — fully integrated systems (motor, battery, controller, sensors, HMI, charger) marketed under the 'ESYNC' brand, evolved from UART to CAN protocol connectivity.

The Company reports having empowered over 0.40 million e-bikes globally with its CVT systems across Fiscals 2024–2026.

Alloys & Metallics (A&M)

The Company's founding business line (commenced 2001), supplying sheet metal and tubular assemblies — chain cases, swing arms, main stands, engine guards — and machined components including cylinder blocks, suspension forks, handlebars, bottom bracket cartridges, stems, tyres and grips, primarily to automotive and bicycle OEMs. A&M products are described as "powertrain neutral," serving ICE, hybrid and EV applications alike.

Manufacturing Capacity Utilization

The HYM and Thailand facilities remain significantly under-utilized (sub-15%), consistent with these being newer capacity additions (the Thailand facility commenced operations only in Fiscal 2024) still in the ramp-up phase — a factor relevant to future margin expansion as utilization improves.

4. Key Business Strengths

• Category leadership in India's e-mobility powertrain space — the only Indian manufacturer exporting CVT hubs to global e-bike OEMs and the only manufacturer of integrated electric powertrain products for e-bikes in India, with e-mobility revenue growing from 12.03% to 23.00% of total revenue over three fiscals.
• Diversified, blue-chip global OEM relationships — long-standing partnerships with BMW, Ducati, Hero MotoCorp, Formula Motorsport, HWA AG and Escorts, spanning automotive, motorsport and non-automotive applications (aerospace, marine, lawn equipment), which the Company views as a structural barrier to competitor entry given high OEM switching costs.
• Geographically diversified manufacturing footprint — six facilities across India, the United Kingdom and Thailand, positioned to serve customers with proximity and cost competitiveness, with two more facilities under construction to extend this reach.
• Technology depth via strategic acquisitions and JVs — the Hewland acquisition (2022–23) added motorsport-grade design and prototyping capability; the Yamaha Motors joint venture (2021) added proprietary electric motor technology under the HYM brand.
• Institutional backing with ESG orientation — equity investment from South Asia Growth Invest LLC and South Asia EBT Trust, both ESG-focused funds, alongside a dedicated internal ESG team.

5. Future Growth Strategy

• Deepen e-mobility systems leadership — expand beyond components toward complete integrated powertrain systems for EVs, building on existing technology center investments in the UK and India to capture the accelerating EV transition (motorcycle segment EV penetration projected to rise from ~2% in 2025 to 10.5–12.5% by 2031, per CRISIL).
• Broaden beyond motorcycles into adjacent verticals — recent order wins in electric hybrid passenger cars, electric lawn mowers, electric all-terrain vehicles and eVTOL (aerospace) applications signal a deliberate move to reduce reliance on the core two-wheeler OEM base.
• Geographic expansion into ASEAN — building on the Thailand facility (anchored by a premium European two-wheeler OEM) as a hub for broader ASEAN market penetration, supported by the region's competitive labour costs and trade-agreement access.
• Leverage Hewland's design-to-cost capability — extend Hewland's motorsport-grade engineering consultancy model into a broader design-to-cost service offering for EV OEMs, creating a second, less capital-intensive revenue stream alongside manufacturing.