Hero Electric IPO: CEO Sohinder Gill disclosed listing plans for an IPO

Hero Electric, part of the Hero Group, plans to target a full-fledged IPO by the financial year 2025-26 or FY26. However, the company has set some preconditions before it readies for the IPO. For instance, the EV (electrical vehicles) manufacturer is working to increase its vehicle sales to 2 million in next three years. That would give them the necessary scale and heft to compete in the rather crowded market. It is too early to discuss dates of the IPO, but it is going by its business targets which will drive the IPO. These details were revealed in an interview by Sohinder Gill, CEO of Hero Electric.

While the EV market has just about started to grow, most of the growth in volume terms is coming from the 2-wheeler and 3-wheeler EV segments. The company is planning to raise funds to bankroll its expansion and capital expenditure plans in the next few years. The company is quite confident of touching the 2 million EV mark before it embarks upon the public issue over the next two plus years. The strategy of the company is to achieve this coveted target by increasing market share, enhancing capex in its manufacturing capacity, spending on support infrastructure and on improving the quality and customer experience for its products and services.

Funding plans are already afoot even ahead of the IPO in FY26. For instance, the company plans to raise funds worth ₹2,000 crore before the end of December 2023 i.e., the completion of the current calendar year. The move will prevent undervaluation of the company in the current scenario. Till date, Hero Electric has already raised funding to the tune of ₹380 crore via debt and equity. Even as it plans its IPO in FY26, debt funding will continue even in the interim period. It may be recollected that Hero Electric had raised around ₹180 crore in its first-ever funding round in 2018.

However, it is not roses all the way; and Hero Electric is among the companies in the EV space that is being probed by the government. Currently, Hero Electric and 10 other EV players, are facing the Indian government's scrutiny for alleged misuse of subsidies given under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. In April 2023, the government revealed in one of its reports that imported parts had been used extensively in the manufacturing of EVs by these companies, which went against the very spirit of the FAME framework. This was clearly seen as a gross violation of PMP rules under FAME scheme. At that point, Hero and Okinawa Scooters had been instructed to repay around ₹130 crore of subsidy amount they had received since 2019. The companies have also been subsequently barred from FAME incentives from the government of India.

For now, that may be history and the focus of Hero Electric would be to plan its IPO and the sales boost before that. In the EV space, it is a nascent business and hence safety and security issues are paramount. These have to be adequately addressed by the company before taking its next step towards the IPO. There is a huge market to tap and first the bells and whistles have to be addressed.