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Informist, Wednesday, May 14, 2025

By Anand JC and P. Madhu Kumar

MUMBAI – Hero MotoCorp Ltd. Wednesday said it expects the two-wheeler industry to grow 6-7% year-on-year in 2025-26 (Apr-Mar), similar to the previous financial year, and expressed confidence in outpacing this growth. A mix of fiscal and monetary policy measures, along with falling inflation, prediction of a good monsoon, and product launches will drive Hero MotoCorp's growth in FY26, its management told analysts in a post-earnings conference call.

Fielding questions from analysts on how the company will outpace industry growth in the ongoing financial year, Hero MotoCorp said it was seeing broad-based growth in its India and global business, including in its electric vehicle offerings. 

"We are positive about the growth prospects of two-wheeler industry, and with the continuity of demand and recovery in the broader two-wheeler market for us, both rural and urban, ramp-up of 125 cc portfolio, new product launches, and strong investment behind brand-power brands, we expect to grow ahead of the industry," the management said.

Hero MotoCorp detailed its March quarter earnings during market hours on Tuesday. It reported a net profit of INR 10.8 billion on revenue of INR 99.4 billion. The company is already seeing some tailwinds play out this quarter with demand shaping up favourably, boosted in particular by the strong marriage season in May and June. The Splendor maker gained retail market share sequentially in each of the last four months, it said.  

The contribution of rural areas to Hero MotoCorp's overall sales is in the high 50s, the company said. "...the prediction of a better monsoon, a good marriage season, increased government spending in rural areas, lower inflation, all that we expect will work in favour of rural," it said.

Hero MotoCorp's earnings before interest, tax, depreciation, and amortisation margin for FY25 was 14.4%, up 40 basis point on year. The improvement was driven by a favourable product mix, enhanced cost efficiencies, and commodity costs, the company said. "We will continue to invest behind growth, and we have given a guidance to the market of maintaining our EBITDA margins between 14 to 16%," the management said. The EBITDA margin for its internal combustion engine-run two-wheelers was 16.1% in the March quarter, while that for its electric vehicles was 14.2%.

In FY25, Hero MotoCorp saw strong gains in the affordable segment comprising motorcycles with a capacity of 125 cubic centimetres. The company has planned product launches to expand its presence in this category and help it become stronger. It gained market share of around 250 bps in this segment in FY25.

Hero MotoCorp currently has a channel inventory of around four-five weeks. "Inventory is always forward-looking. We know that as we get up with the festive season, we will be able to step it up in accordance with what we expect out of the festive season. But we are sufficiently covered in terms of inventory," the company said. 

In the electric mobility space, the company noted that volumes grew 2% year-on-year in FY25, while its EBITDA fell 95% from a year ago. In contrast, EBITDA of this segment had contracted 155% from FY23. If the company manages to sell 25,000-30,000 electric scooters per month, it expects this segment to break even after two years. In March, Hero MotoCorp forayed into the electric three-wheeler space through a INR 5.3 billion deal in Euler Motors Pvt. Ltd. "We are seeing rapid electrification in the three-wheeler category. We believe this is the right time for us to really enter (this space)," its management said. 

"What will really make this business profitable is the scale-up, which we talked about, the cost reduction through localisation, PLI (production-linked incentive scheme) benefit realisation. These are the things which will really help improve the profitability of the business going forward," it said. Hero MotoCorp filed an application to avail benefits under the production-linked incentive scheme for its Vida Pro, and expects an approval by July. The company also plans to launch two new affordable electric products in the first half of the ongoing financial year.

Hero MotoCorp is the corporate promoter of newly listed electric two-wheeler maker Ather Energy Ltd., in which it held 34.76% stake as of Jun. 30. "I think clearly it's a long-term investment we've made. I think we really like the enterprise, and we really continue to stay invested in that," the company said. 

The company's average realisation went up in the March quarter sequentially. Around two-thirds of this increase in realisation came from its two-wheelers business, and the rest from its spare parts business. This increase in realisation was also driven by its product mix. Hero MotoCorp's spare business reported revenue of INR 15.5 billion for the March quarter, up 11%. The company expects this segment to report double-digit growth in FY26 as well.

At 1310 IST, shares of Hero MotoCorp were at INR 4,058 on the National Stock Exchange, down 0.1%.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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