World’s Largest 2-Wheeler Maker: Hero MotoCorp

Hero motocorp fundamental research article

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Hero MotoCorp Limited (HMCL) is the largest manufacturers of two-wheelers producing motorbikes and scooters. HMCL is a market leader in domestic motorcycle market. Also, among the top three in scooter manufacturing in India.

The company is a part of the The Hero Group (Munjals’) Business Empire. Dr. Brijmohan Lall Munjal is the founder of HMCL. Mr. Pawan Munjal, son of Dr. Brijmohan Lall Munjal is the present Chairman, Managing Director and CEO of HMCL.

Top Events of Hero MoroCorp Business since Inception

1983 to 1990

  • 1983: India's Hero Group and Honda Motor Company Japan signed a joint collaboration agreement for forming a joint venture.
  • 1984: Thus, Hero Honda Motors Ltd. incorporated as a joint venture company between Honda Motor Company of Japan and Hero Group.
  • 1985: The company commenced commercial production at Dharuhera plant in Haryana. Further during the year, introduced first motorcycle CD 100 in the market.
  • 1987: The company rolled out 1,00,000th motorcycle.
  • 1989: Launched a new motorcycle model ‘Sleek’ in the market.

1991 to 2000

  • 1991: Introduced new motorcycle model ‘CD 100 SS’ in the market. Also, 500,000th motorcycle produced by the company.
  • 1994: HMCL introduced their extraordinary product ‘Splendor’ in the market. Also, produced 1,000,000th motorcycle.
  • 1997: Second manufacturing facility situated Gurgaon in Haryana was inaugurated by the company. Also introduced new motorcycle model ‘Street’ in the market in this year.
  • 1999: Launched Hero Honda CBZ.
  • 2000: Achieved 4,000,000th motorcycle production.

2001 to 2010:

  • 2001: New models Passion and Joy launched in the market. Also, the company increased FII limit to 40%.
  • 2002: The Company introduced further new models Dawn and Ambition in the market.
  • 2003: Launched new motorcycle models namely CD Dawn, Splendor+ and Passion Plus in the market. Also launched Hero Honda ‘Karizma’ the first 223cc motorcycle in India.
  • 2004: Company made a global record with crossed sales of over 2 million units in a single year. New models - Ambition 135 and CBZ* introduced by company during the year.
  • 2005: Till now the company was only present in motorcycle segment. Then in 2005, forayed into scooter segment and launched 100cc gearless scooter Pleasure.
  • 2006: The company completed it capacity expansion at Gurgaon of 4,50,000 units. Also updated on ongoing additional expansion of 4,50,000 units at Dharuhera plant. Moreover inaugurated new manufacturing plant in Haridwar, Uttaranchal with 5,00,000 units capacity. Moreover, the company announced plans for its new plant in Jaipur with initial production capacity of 5,00,000 units.
  • 2007: Launched - Splendor NXG, CD Deluxe, Passion Plus and Hunk.
  • 2010: Honda & Hero Honda signed MoU for New Licensing Arrangement; Hero Honda to develop its own R&D capabilities & exploit export opportunities while Honda continues to provide new models.
  • Further, a family agreement realigned the ownership of HMCL. After that, Hero Investments Pvt. Ltd. (HIPL) & Bahadur Chand Investment Pvt. Ltd. (BCIPL) became the Indian promoters of HMCL (see the complete structure).

2011 to 2016:


Munjals took an unconventional step and decided to walk out of the JV Hero Honda Motors. Consequently, bought the shares held by Honda. Later, Hero group renamed the company as Hero MotoCorp.


Hero MotoCorp entered into a strategic partnership with Erik Buell Racing (EBR) of USA for contemporary technology and design inputs to launch high end bikes. Also, BOD approved merger of Hero Investments Private Ltd. (HIPL), into HMCL.


HMCL formed a JV "HMC MM Auto Ltd" with Milan headquartered - Magneti Marelli for devloping new generation fuelling systems.


Inaugurated Neemrana Plant & Global Parts Centre with installed capacity of 7,50,000 units p.a. The company also commenced operations in Bangladesh.


Formed JV (55% ownership) with "Nitol Niloy group" to build its 1st overseas manufacturing plant with annual capacity of 1,50,000 units. Another manufacturing plant in Columbia announced with initial 78,000 units capacity.


Hero MotoCorp strengthened its technology team by appointing Dr. Markus Braunsperger as Chief Technology Officer. Prior to Hero, he worked at BMW Germany for 25 years.


Also, Hero MotoCorp inaugurated its Neemrana Plant & Global Parts Centre. Moreover, announced expansion in European market by next year.


Hero MotoCorp launched a new entry level commuter the "HF Dawn" and two scooters under the brands "Maestro Edge" and "Duet".
Secondly, HMCL Americas Inc. entered into settlement agreement to acquire EBR's Consulting Business (in which HMCL held equity investment).
Also in 2015, the company commenced operations in its first ever plant outside India established in Villa Rica, Colombia.

Later, Dr. Brijmohan Lall Munjal, the founder, passed away on November 01, 2015.


Hero MotoCorp inaugurated its`Global Centre of Innovation and Technology' (CIT) in Jaipur, Rajasthan; built with an investment of Rs. 850 crore.


BOD of HMCL approved an investment of up to Rs 205 crore in one or more tranches for approximately 26-30% shareholding in Ather Energy Pvt. Ltd. Ather Energy is Bangalore-based technology start-up engaged in designing and manufacturing smart Electric Vehicles (EV) and also the associated charging infrastructure.

2017 to 2019:


HMCL launched new Glamour motorcycle in Argentina; its first-ever global launch of a new product outside India. Then, in May 2017 Hero MotoCorp commenced commercial production at the second global manufacturing facility in Bangladesh.

In order to further augment its dominant leadership in the domestic market unveiled three new motorcycles - 125cc Super Splendor, 110cc Passion PRO and 110cc Passion XPRO. Overall in calendar year 2017, Surpassed 75 million mark of cumulative sales and sold 7 million units.


Hero MotoCorp increased the ex-showroom prices of its motorcycles by up to Rs 625 per model to partially off-set rising input costs in April 2018 and then to Rs. 900 per model in Oct 2018.


Laid Foundation stone of 8th manufacturing site at Chittoor, Andhra Pradesh. Also, for providing genuine parts to customer and to curb the fake spare part sale they launch e-commerce portal for Hero Genuine Parts.
In addition, following its plan of 2016, the company announced investment of Rs. 130 cr. through CCDs (Compulsorily Convertible Debentures) in Ather Energy.


Hero MotoCorp launched India’s first scooter with fuel injection (FI) technology – Maestro Edge 125 and ‘retro-styled’ new pleasure+ 110. Moreover, HMCL became the first two-wheeler manufacturer to get BS-VI certification in June 2019.
Company increased prices across its range of two-wheelers of 1% (of the ex-showroom price) in July 2019.

Shareholding Pattern

As on 30 June 2019, Promoters & Promoter Group shareholding is 34.63%. Institutional shareholding is 53.8%; Mutual Funds hold 7.97%; insurance companies hold 8.46% and Foreign Portfolio investors hold 35.2%. Thus, Non-Institutional holding is 11.57%. Click to enlarge image

Hero MotoCorp Executive Management

Dr. Pawan Munjal [Chairman, Managing Director & CEO]

Dr. Pawan Munjal is the son of founder of the company Dr. Brijmohan Lall Munjal.  He is a mechanical engineer by profession. He joined the company as a director and became managing director in 2001. His remuneration in FY19 was Rs. 80.41 crore.

Mr. Vikram S. Kasbekar [Executive Director - Operations (Plants)]

Mr.Vikram is responsible for plant operations. He has been working with Company for close to 16 years. In addition, Kasbekar has 4 decades of experience in the field of Operations, Supply Chain, Manufacturing, Project Engineering and New Model Development. His remuneration in FY19 was Rs. 6.19 crore.

Total Managerial Remuneration for FY19 was Rs. 90.83 crore i.e. 0.27% of revenue from operations and 2.62% of PAT.

Hero MotoCorp Products

Principal business of the HMCL is manufacturing and selling of motorised two wheelers upto 350cc engine capacity & parts thereof.

(i) Motorcycles:

Manufacturing and selling of motorcycles is main contributor to the revenue of business. Also the company is market leader in this segment. Brands under motorcycle segment are -

XPulse 200, XPulse 200T, Xtreme 200S, Xtreme 200R, Karizma ZMR, Xtreme Sports, ACHIEVER 150, Glamour Programmed FI, Glamour, Super Splendor IBS, New Super Splendor IBS, Passion XPro IBS, Passion, Splendor iSmart+ IBS, Splendor+ IBS, HF Deluxe IBS and HF Deluxe IBS i3S.

(ii) Scooters:

HMCL entered in scooter segment in 2005. The segment includes Destini 125, Duet, Maestro Edge, Maestro Edge 125 FI, Maestro Edge 125, Pleasure and Pleasure+. Then, the company achieved ~10% market share in scooter segment in FY19,

New Products Launched in FY19

Passion XPro, Splendor iSmart+, HF Deluxe, Super Splendor, Splendor + and Glamour FI are launched in FY19. In addition, XPulse 200, XPulse 200T and Xtreme 200R bikes are launched in premium segment.

Moreover, in scooter segment, Destiny 125 in 125cc category launched during the year.

Revenue Segments of Hero MotoCorp

HMCL's revenue from operations comprise of: Click to enlarge image

  • Sale of Two Wheelers: Revenue generated from sale of Two Wheelers is the main contributor to the overall revenue of the company.
  • Spare Parts & Components: Provision of Spare Parts & components are also essential for any Two Wheeler. The company is providing genuine parts to customers through its online portal. Parts business grew 11% in FY19.
  • Income from Services: Revenue in this category comes from various services provided by the company. For instance, Dealer support service, Goodlife program for customers & other related services.
  • Other Operating Revenue: This includes Duty Drawback & Other Incentives, Incentive from state Govt. under different schemes and some other minor incomes.

Geographical Distribution of Revenue of Hero MotoCorp

hero motocorp domestic and exports revenue distribution

HMCL is present in 37 countries of the world. Earnings generated from exports also form a part of revenue. Domestic Revenue is 32,698.71 crore in FY19 and 32,168.75 crore in FY18. Secondly, for the same period Overseas revenue is 1,273.52 crore and 932.19 crore. Domestic revenue contributes ~96% of the overall sales.

Sales Volume

Number of units sold by HMCL in last five years has shown an increase in five years. The increase was high in FY18 as compared to other years. In FY18, sale volume increased by 13.85% over FY17. Click to enlarge image

International Presence

Outside India, Hero MotoCorp is present in following regions and countries:

  • Asia - Bangladesh, Myanmar, Nepal and Sri Lanka.
  • Africa & Middle East - Angola, Burkina Faso, DR Congo, Ethiopia, Ghana, Guinea, Ivory Coast, Kenya, Liberia, Madagascar, Mozambique, Nigeria, Tanzania, Uganda, Egypt, Iran, Turkey and UAE.
  • America - Argentina, Bolivia, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Peru, Guyana and Trinidad & Tobago.

Manufacturing Facilities of Hero MotoCorp

HMCL has 7 manufacturing facilities, five in India and one each in Colombia and Bangladesh. Overall installed capacity of these seven plants is around 9 million units of two-wheelers per annum. Futher, this capacity will go up to 11 million units, when the 8th manufacturing facility in Andhra Pradesh becomes operational. The plant's Phase I is expected to get operational by October 2019. Click to enlarge image


Due to coming of Electric Vehicles and BS-VI norms Automobile Industry is rapidly changing . So to cope up with these changes, HMCL incurs R&D cost.

The two R&D centres set up by Hero MotoCorp are:

  • Firstly, The Centre of Innovation and Technology (CIT) Jaipur, Rajasthan
  • Secondly, recently launched Germany R&D Center, Germany

R&D Expenditure

Click to enlarge image

Capacity Expansion

Construction of 6th manufacturing facility (in India) at Sricity in Chittoor District in the state of Andhra Pradesh is ongoing. This plant shall have annual installed capacity of 1.8 million units. Company invested approx. Rs. 650 crore in Phase I out of total projected investment of Rs. 1,600 crore. Phase I is expected to become operational by October 2019.

Distribution Network

Hero MotoCorp has a total 9000 touch points across the globe. Out of which 6500 are in India and 2500 are in other countries.


Foreign Earnings are because of the export of two wheelers to other countries. Foreign Payments are on account of Royalty, Technical Guidance Fee, travel, advertisement and publicity. Also, the payments are for import of components, spare parts, raw materials and capital goods. Net foreign earnings are in negative and doubled in FY19 as compared to FY18. Click to enlarge image

Subsidiaries and Associates

Click to enlarge image

Competitors & Market Share

Hero MotoCorp is the largest two-wheeler manufacturer in India. For FY19 also, Hero MotoCorp maintained its position at top amongst the other two-wheeler manufacturers.

Following the same trend as FY18, Honda Motorcycle & Scooter India held the 2nd position. HMCL's overall market share fell by 1% in FY19 to 35.9% from 36.6% in FY18.

Top 10 Two-wheeler Makers FY19:

Click to enlarge the images

The above % figures include both gear and non-gear vehicles manufactured by the players

Top 5 Motorcycle Players: Market Share FY19:

Market share of Top 5 Motorcycle Players in India

Top 5 Scooters Players: Market Share FY19:

Market share of top 5 scooter players in india

Segment Wise Market Share of Hero MotoCorp

segment wise market share of Hero Motocorp 2019

Competitive Advantage (Moat)

With strong brand positioning and good distribution network the company’s market position in motorcycle is very good. The company’s position is very strong in Entry level and Deluxe 125cc segment. The company has been able to maintain its market position despite the overall auto sector downfall. Also, the company remained under top 5 companies whose sales volume rose despite the downfall during FY19. The company has a strong acceptability in rural and urban markets due to its brand image.


HMCL has a very low share in premium motorcycle segment and it also further declined in FY19. The export business is not very large as compared to their competitors. In scooter segment also market share is not large. Though, HMCL has launched new products in motorcycle and scooter segment to increase its share.

Hero MotoCorp Concall Highlights

Concall of HMCL held on 30 July 2019 for Quarter 1, FY20.

  1. Sold 18.4 lakhs vehicles during the quarter and this is lower by 12.5% on a YoY basis. Industry vehicles sale is lower by 10%.
  2. EBITDA margin improved by 80bps and is 14.4%.
  3. PBT included an exceptional item of Rs.737 crore. This is on account of the NCCD provision, made over the years, now reversed. One off item in other income is 50 crore and it is interest provision reversal consequent to NCCD.
  4. Higher charge for depreciation of Rs.65 crore. This is accelerated depreciation on assets which will end their life by 31st March 2020 on account of BS-VI.
  5. Company extended the credit period to dealers because of adverse condition in market. Receivables are high due to this.
  6. The company launched Maestro 125cc and Maestro FI 125cc to support Destini. Destini has 15% share in retail market.
  7. Secondary network includes Authorized Service Center. It is operated by dealers and has contribution of 53% to overall business of the company.
  8. Hero MotoCorp's overall financing of sales in this quarter was 37.3%. Hero FinCorp share is 47% out of this and it increased from 42%.
  9. The management has not provided any specific timeline for launching an EV model.
  10. In July there is price hike of around .8% to 1% of the pricing.

Future Course of Action

A new R&D center has been set-up by Hero in Germany to develop the right technology for future. Hero MotoCorp is committed to expand its footprint to 50 countries by 2020. Further, HMCL is ready with its BS-VI products to enter the market and launch vehicle on right time.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry's Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. The report & references mentioned are only for the information of the readers about the industry stated.

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