Hero Motors shares rally 20% to hit upper circuit for second day post-listing; what investors should know

Auto component manufacturer Hero Motors shares surged 20% to hit its upper price band for the second consecutive trading session on Thursday, September 24, as investors continued powering the buying momentum after a discounted debut on the stock market.

Trading volumes surpassed 167 million equity shares across NSE and BSE combined as of the noon deals, triggering the high-volume gains on Sept. 24. After the trading suspension at the upper price band level, no sell orders were in sight, indicating elevated buying interest among investors.

Latest media reports from CNBC TV-18 suggest that a large-size block deal was executed in Hero Motors shares during the intraday trading session, with an estimated 2.4 crore shares exchanging hands, equivalent to around a 5.3% stake of the company.

Despite the discounted debut on the exchanges, Hero Motors shares rallied 20% to hit the previous upper circuit level of ₹98.40 apiece during the intraday trading session on the listing day.

On the listing day, the company’s stock recorded several bulk deals, powering the high trading activity on the market.

Hero Motors’ IPO funds usage plan

With the Hero Motors IPO being a combination of a fresh issue and an offer-for-sale (OFS) component, the proceeds raised from the market will go towards the promoters selling their stakes and the company’s future expansion plans.

In the official SEBI filings, the company disclosed that they plan to use ₹190 crore out of the total ₹600 crore to repay or prepay loans and use ₹200 crore towards funding capital expenditure (capex) plans for purchasing equipment required for expansion in capacity of our Gautam Buddha Nagar, Uttar Pradesh facility.

The remaining ₹171.98 crore is planned to be used for funding inorganic growth through unidentified acquisitions and other strategic initiatives and general corporate purposes.

The company also spent ₹380.12 crore for IPO related expenses, as per the official filing.

Hero Motors’ IPO subscription

Data showed that Hero Motors IPO was subscribed 6.66 times, with stock market investors bidding for 58,97,26,638 equity shares against the 8,86,07,596 shares on offer for public subscription.

Non-institutional investors (NIIs) led the bidding round with 9.86 times subscription, followed by retail investors subscribing 8.23 times, while the qualified institutional buyers (QIBs) bid for 1.49 times the offer.

Hero Motors is an automotive component manufacturer which designs, develops, manufactures, and supplies engineered powertrain solutions to automotive original equipment manufacturers (OEMs) in the US, Europe, India and the Association of Southeast Asian Nations (ASEAN) region.

The company has key clients like BMW AG, Ducati Motor Holding SPA, Enviolo International Inc., Formula Motorsport Ltd and Hummingbird EV.