HERO MOTORS LIMITED

Consumer Cyclical — Auto Parts · NSE

₹148.99−₹3.76 (−2.46%)

DalalBaazaar Score

39 / 100

🔴 Weak

Verdict

CAUTION

Risk

High

Driven by moderate debt load, short-term liabilities exceed short-term assets, small-cap size, which brings sharper price swings.

In simple words: Reasonable but unspectacular business quality, with both sales and profits growing well. Short-term liquidity is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:10 pm

Mixed / neutral. No major red flags jump out, but nothing here screams "obviously cheap" either. This is a name that needs a peer comparison and a view on near-term earnings triggers before sizing a position.

Understanding the Business

Company site ↗

The 60-second version of HERO MOTORS LIMITED — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Hero Motors Limited designs, develops, manufactures, and supplies engineered powertrain solutions catering to automotive original equipment manufacturers (OEMs) in United States, Europe, India, and the Association of Southeast Asian Nations region.

IndustryAuto Parts

SectorConsumer Cyclical

Employees1,062

Annual revenue₹1,153 Cr

How does it make money?

Turns over ₹1,153 Cr a year. Of every ₹100 of sales, about ₹4 reaches shareholders as profit, with ₹12 left at the operating level before interest, tax and depreciation. Each of its 1,062 employees supports ₹1.09 Cr of revenue a year, the signature of a capital- or asset-led business.

EBITDA margin12.2%

Net margin3.8%

Revenue / employee₹1.09 Cr

Who are its competitors?

The closest listed comparisons in its industry are BOSCH LIMITED, MARUTI SUZUKI INDIA LTD., TVS MOTOR COMPANY LTD, EICHER MOTORS LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

BOSCH LIMITEDP/E 56.9x · ROE 15.9%

MARUTI SUZUKI INDIA LTD.P/E 25.2x · ROE 13.4%

TVS MOTOR COMPANY LTDP/E 56.8x · ROE 35.8%

EICHER MOTORS LTDP/E 34.7x · ROE 23.0%

What is its competitive advantage?Little sign of one

Returns on capital of 13.0% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

ROCE13.0%

ROE9.2%

Peer median ROE23.0%

What has been driving growth?

Growth has come mainly from selling more, rather than from keeping more of each sale. Over 3 years revenue moved +11% while net margin moved -4% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+11%

Margin effect-4%

DalalBaazaar Score

39/ 100

Weak

Weighted across six categories. Every point is explained below.

✗ P/E of 69.0x is demanding — it needs sustained high growth to justify
✗ P/B of 11.77x is a steep premium to book

Quality vs. Valuation

Company Quality

43/ 100

Weak

How good the business is, ignoring the share price entirely.

Valuation

23/ 100

Expensive

What you are being asked to pay, ignoring how good the business is.

Weak on business quality and not cheap enough to compensate.

Historical Valuation

Current P/E

69.0x

Sector Median

45.7x

median of 4 sector peers

⚠️Against its sector it trades 51% above the peer median of 45.7x.

vs. its own history

Not enough price and earnings history

vs. sector peers

Expensive

45.7x median of 4 peers · +51%

vs. generic bands

Expensive

Above 35x

P/E (Trailing)

69.0x

P/B

11.77x

EV/EBITDA

52.3x

PEG

29.14

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well3

Margins are improving
EBITDA margin is up from 8.7% to 12.2% over 3 years.
Cash flow has turned positive
Free cash flow moved from negative to positive over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Debt is rising
Total debt is up 64% over 3 years — worth checking what it funded.
Short-term liquidity is tight
Current ratio of 0.94 — near-term obligations exceed near-term assets.

Red Flags

2 items require attention · 1 high · 1 watch

🔴Debt has risen sharplyFinancial
Total debt is up 64% over 3 years, from ₹373 Cr to ₹613 Cr.
🟡Short-term liquidity is tightFinancial
Current ratio of 0.94 — near-term obligations exceed near-term assets.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 8.7% to 12.2%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

The debt load needs earnings to hold up
Debt is 4.4x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
A premium to the sector to defend
It trades 51% above the peer median. That premium needs a reason that persists, or it closes.
Growth barely outpaces inflation
Revenue compounding at 3.6% a year is close to the rate prices rise, so the business is gaining little ground in real terms. That leaves the share price dependent on a re-rating rather than on earnings growth.
Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
Size brings its own risk
Small Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 10%✓ 12.2%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA falls below 3x✗ 4.4x
Already stretched, so this is a reduction target rather than a level to hold. Around 3x is where lenders typically start attaching conditions.
3Interest cover stays above 3x✗ 2.8x
How much operating profit can fall before interest stops being comfortably covered.
4Revenue growth stays above 4% a year✗ 3.6% CAGR
Latest reported year was 24.9%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
5Free cash flow remains positive✓ ₹52 Cr
Profit that never becomes cash eventually stops being profit.

Investment Checklist

4 / 10 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✓ Generates positive free cash flow
✗ Manageable leverage (Debt/Equity < 1.0)
✗ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✓ Profit growing year-over-year
✗ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high

Price history

Quick Metrics

4 good · 5 neutral · 2 weak

Market Cap

₹6,767 Cr

Small Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

69.0x

Expensive

Expensive — verify against sector peers

P/B Ratio

11.77x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹2.16

Profitable

Profitable on a per-share basis

ROE

9.2%

Moderate

Moderate capital efficiency

ROCE

13.0%

Moderate

Moderate return on the capital in the business

Debt/Equity

1.28x

Moderate

Moderate leverage

Revenue Growth (YoY)

24.9%

Healthy

Healthy top-line growth

Profit Growth (YoY)

125.0%

Healthy

Profits growing at a healthy clip

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

₹52 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

CMP

₹148.99

Operating Margin

7.3%

Average

Average margins

Net Margin

3.9%

Average

Average bottom-line conversion

Current Ratio

0.94

Adequate

Adequate, but no real cushion

52W Range Position

70%

Mid-range

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹1,036 Cr	₹1,039 Cr	₹1,051 Cr	₹1,153 Cr	+3.6%
EBITDA	₹90 Cr	₹77 Cr	₹107 Cr	₹141 Cr	+16.1%
EBITDA Margin	8.7%	7.4%	10.2%	12.2%	—
PAT (Net Profit)	₹41 Cr	₹13 Cr	₹25 Cr	₹44 Cr	+2.4%
EPS	₹1.07	₹0.35	₹0.67	—	—
ROE	11.6%	3.5%	5.9%	9.2%	—
ROCE	14.7%	8.9%	10.7%	13.0%	—
Total Debt	₹373 Cr	₹410 Cr	₹473 Cr	₹613 Cr	+18.0%
Free Cash Flow	-₹96 Cr	-₹1 Cr	-₹104 Cr	₹52 Cr	—

🟢 Revenue has grown at 3.6% a year over 3 years.

🟢 EBITDA has grown at 16.1% a year over 3 years.

🟢 EBITDA Margin has risen from 8.7% to 12.2% over 3 years (+3.5 pts).

🟢 PAT (Net Profit) has grown at 2.4% a year over 3 years.

🔴 ROE has fallen from 11.6% to 9.2% over 3 years (-2.5 pts).

🔴 ROCE has fallen from 14.7% to 13.0% over 3 years (-1.7 pts).

🔴 Total Debt has grown at 18.0% a year over 3 years.

🟢 Free Cash Flow has turned positive, from -₹96 Cr to ₹52 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹1,372 Cr

Total Liabilities

₹891 Cr

Total Debt

₹613 Cr

Cash & Equivalents

₹22 Cr

Operating Cash Flow

₹144 Cr

Capex

-₹92 Cr

Shareholding (proxy)

Institutional Holding

10.3%

Insider Holding

73.2%

Peer Comparison

Company	P/E	ROE
BOSCH LIMITED	56.9x	15.9%
MARUTI SUZUKI INDIA LTD.	25.2x	13.4%
TVS MOTOR COMPANY LTD	56.8x	35.8%
EICHER MOTORS LTD	34.7x	23.0%

Recent News

4 mixed2 general

Hero Motors shares jump up to 8% as Q2 profit more than doubles; stock up 66% since listing

Moneycontrol.com, 14 OctPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Hero Motors share price jumps 6.5% on strong Q2 results | Check share price performance, earnings details | Buy or sell?

Livemint, 14 OctPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Hero Motors IPO Listing: Stock Recovers After Weak Listing, Trades at ₹95.98

India Infoline, 23 Sept

Recently listed Hero Motors share price jumps 8% after Q1FY27 net profit soars 145%

Upstox, 14 OctPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

73% Rally In Three Days: Hero Motors Share Price Hits 20% Upper Circuit On Third Day After Debut

NDTV Profit, 25 Sept

Hero Motors Share Price Jumps 6.5% on Strong Q2 Results 2026

Univest, 14 OctPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🟡Business QualityAdequate10.5/20

🟡Financial HealthAdequate9.8/20

🔴GrowthWeak7.4/20

🔴ProfitabilityWeak4.5/15

🔴ValuationDemanding3.2/15

🔴RiskHigh3.2/10

Weak on the fundamentals

Poor scores on business quality without a price low enough to compensate. There is no obvious argument for owning this over a stronger company at a similar valuation. 1 high-severity red flag sits above this conclusion and should be read first.

This thesis breaks if

✓EBITDA margin holds above 10%12.2%
✗Debt / EBITDA falls below 3x4.4x
✗Interest cover stays above 3x2.8x
✗Revenue growth stays above 4% a year3.6% CAGR
✓Free cash flow remains positive₹52 Cr