Hero Electric, the country’s biggest manufacturer of electric two-wheelers, is talking to investors to raise funds for expanding business multiple times over amid an on-going tussle with Hero MotoCorp to ringfence the Hero brand.
From a level of around 130,000 a year, Hero Electric is looking to move to 5 million units capacity a year in the next 24 months. To achieve this, it forged a partnership with the Mahindra Group this month to use their plant in Pithampur, Madhya Pradesh for an initial capacity of 200,000-250,000 units a year.
“We are not growing 40-50 per cent, we are growing multiple times. For instance, we are doubling our volumes this year over the previous year and next year we will be tripling over this year and that’s the bare minimum. So, when we are pushing each segment of our business, like sales, R&D, new factories, there is a constant need for capital. We raised capital last year, now again there is need for another raise,” Naveen Munjal, Managing Director, Hero Electric, told BusinessLine.
There is already an expansion activity going on at its home factory in Ludhiana where capacity it being tuned up to 250,000-300,000 units a year from just 75,000 units a year. A further two new factories having capacities of two million each per year is being planned for which additional capital is required.
Battle for brand
When asked if the promoters are ready to dilute stake in Hero Electric, Munjal said, “We have to look at the larger picture. If dilution of stake means the pie becomes much bigger than what we could have grown ourselves then of course absolutely. There is no point for us to hold on to equity and remain as part of small pond, I would rather be in the ocean.”
This comes even as Naveen is fighting his uncle Pawan Munjal on the use of brand Hero. Earlier this month Hero Electric, headed by Naveen Munjal moved the Delhi High Court seeking an injunction against the Pawan Munjal-led Hero MotoCorp over the use of the Hero brand name. Hero MotoCorp, which is India’s largest two-wheeler producer, has promised its debut in the electric vehicle space before March.
According to Hero Electric, the company has the sole right to use the Hero brand which cannot be used by anyone else, including entities controlled from the broader Munjal family, in the electric vehicle space. This is as per the non-compete clause mentioned in the restructuring plans of the Hero Group hammered out in 2010.
“I have no idea how this would be settled amicably. (However), I am more than happy to settle this amicably. We don’t want to wash our dirty linen in the public. This is business and I have to protect the business where I have investors,” Naveen said.
Meanwhile, Hero Electric has charted out an aggressive growth plan for itself for the next two to three years including the entry of financial investors through stake sale in the company.
EV space heats up
Since demand for battery electric vehicles has gone through the roof, most automotive companies are steadfastly charting out expansion plans. Hero MotoCorp has a significant stake in the privately held Bengaluru-based company Ather Energy as well as a partnership with Taiwan’s Gogoro. If Naveen Munjal wins the court battle against his uncle Pawan Munjal, then Hero MotoCorp will have to give up the idea of using the Hero brand on its own range of electric vehicles.
“We have been using the Hero brand for 15 years. The brand ownership is with our family and we will do everything we can to protect that,” Naveen Munjal added.