Hero Motors Limited has been able to raise ₹299.99 crore from anchor investors for its initial public offering. The anchor capital raising is a vital milestone used in the public subscription component of the company’s public offering. Major financial institutions, leading insurance firms, domestic mutual funds, and world-class funds have shown a strong interest during the anchor funding round, the official disclosures from the organisation stated. The anchor stock sale marks a high level of institutional faith in the business and financial strength of the company as it nears its initial public offering.

Anchor allotment and structure of IPO

Hero Motors has confirmed in a formal communication to the stock exchanges that it has set aside 57,14,284 equity shares for designated anchor investors. The total raised capital is ₹299.99 crore, which is made up of these equity share allotments sold at the issue price of ₹84 per share. 

The initial price band for the public issue by the automotive tech firm is set at ₹79 and ₹84 per share. The anchor allotment was conducted in accordance with the overall issuance of 3,57,14,284 equity shares for the public issue by the institutional anchor entities.

The anchor investment round of Hero Motors saw participation from a diverse range of domestic and international institutional investors. Other significant institutions include Asia Society of Agricultural and Biological Sciences Global Fund Incorporated VCC Sub Fund, Societe Generale – ODI, Edelweiss Life Insurance Company Limited, and ICICI Prudential Life Insurance Company Limited. 

Domestic equity-oriented mutual fund schemes were also active around the anchor allotment. In addition to a number of participating funds, key equity-allocation funds were ICICI Prudential Smallcap Fund, Kotak Mahindra Trustee Co Ltd A/C Kotak MNC Fund, and JM Financial Mutual Fund – JM Flexi Cap Fund. 

Amongst the total anchor allotment of 3,57,14,284 equity shares, a large share of 2,91,64,441 equity shares was earmarked for 7 domestic mutual funds, under 16 different mutual fund schemes.

The initial public offering from Hero Motors has been designed as a dual-issue transaction of both a new placement and an offer-for-sale. The fresh issue part of the public offer is to raise ₹600 crore directly for the company. 

The offer-for-sale (OFS) category consists of the sale of equity shares not exceeding ₹400 crore by existing promoter groups. The selling promoters for the offer-for-sale segment of the issue are O P Munjal Holdings and Hero Cycles Limited. The public subscription window is initiated for public investors today for the initial public offering.

Core capabilities and capital allocation plans

Hero Motors has presented a clear roadmap in relation to the deployment of funds raised through the fresh issue of ₹600 crore. Of the fresh capital raised, ₹190 crore will be specifically used for repaying, prepaying or redempting, in full or in part, certain existing outstanding borrowings that the company had availed before the fresh capital was raised. 

The capital expenditure projects have been provisioned with an allocation of ₹200 crore. The capital expenditure is expected to include the purchase or acquisition of existing equipment for operations, which will support expansion of the company’s manufacturing plant in Gautam Buddha Nagar, Uttar Pradesh. 

The capital from the fresh issue would be used to fund inorganic growth via undisclosed corporate acquisitions, strategic business programs, and general corporate needs.

Hero Motors is a well-known automotive technology firm with specialist industrial expertise. The company is proactively involved in the design, development, production, and provision of powertrain engineered solutions. 

It serves automotive original equipment manufacturers, mainly in domestic and international geographies. The company currently operates in the United States, Europe, India, and ASEAN markets.

Conclusion

With the successful capital raising of ₹299.99 crore from various anchor investors, the board of Hero Motors Limited appears to have made a solid foundation for the initial public offering. The company has garnered significant institutional interest from various life insurance institutions, international funds and domestic mutual fund schemes.

The proceeds obtained from the fresh issue segment will help Hero Motors save ₹190 crore in debt and invest ₹200 crore in expansion at Gautam Buddha Nagar, while also supporting strategic acquisitions. The company is well-positioned to supply powertrain solutions to major automotive markets worldwide and therefore has a clear operational vision and strategy for going public.