Hero Motors earmarks ₹200 crore despite 76.61% utilisation

Hero Motors proposes to use ₹200 crore of net proceeds for powertrain machinery at its Gautam Buddha Nagar, Uttar Pradesh facility despite reported total capacity utilisation of 76.61% in fiscal 2025. The indicative procurement comprises 26 machines with quotations totalling ₹227.64 crore, with the balance and additional costs proposed from internal accruals.

Why is Hero Motors earmarking ₹200 crore before full utilisation?

Hero Motors is earmarking ₹200 crore to expand powertrain-solutions capacity for expected additional orders, rather than stating that Gautam Buddha Nagar has exhausted its existing capacity. The Board took note of the proposed capital expenditure on August 28, 2026, and the stated objective is to increase the collective contribution from systems and e-mobility-related products and services.

The demand rationale relies on projected battery electric vehicle, or BEV, growth. A CRISIL report cited by Hero Motors projects BEV volumes to increase from 3.36 million units in 2024 to 11.5 million to 12.5 million units by 2031, representing a compound annual growth rate, or CAGR, of 18% to 20%. CAGR is the annualised rate of growth over a defined period.

Hero Motors also cites the CRISIL projection that electric-vehicle penetration in the motorcycle segment will rise from 2.0% in 2024 to 10.5% to 12.5% in 2031, with a 34% to 38% CAGR. The machinery case therefore depends on Hero Motors securing orders linked to that forecast demand, because the disclosure does not identify a binding customer order for the proposed ₹200 crore equipment programme.

What does 76.61% Gautam Buddha Nagar utilisation mean?

Hero Motors reported total capacity utilisation of 76.61% at Gautam Buddha Nagar in fiscal 2025, compared with 74.43% in fiscal 2024. The company defines capacity utilisation as actual production divided by annual available capacity in the relevant fiscal, and the figures were certified by Deba Engineers & Consultants, an independent chartered engineer, on August 28, 2026.

The 2.18-percentage-point increase between fiscal 2024 and fiscal 2025 indicates that reported use of available capacity rose, but the 76.61% rate also means the facility was below full utilisation. This is relevant because Hero Motors is proposing new machinery specifically for powertrain solutions while the disclosed measure covers the Gautam Buddha Nagar facility's powertrain and sheet-metal operations together.

Product-level disclosure shows that powertrain utilisation at Gautam Buddha Nagar was 82.83% in fiscal 2025, compared with 85.17% in fiscal 2024. Sheet-metal utilisation moved to 74.39% from 73.72% over the same period. The proposed purchase targets powertrain equipment, making the 82.83% powertrain rate more directly relevant than the facility-wide total, although it was lower than the prior fiscal's 85.17%.

Which 26 machines does Hero Motors propose to buy?

Hero Motors proposes an indicative list of 26 new machines with aggregate quoted costs of ₹227.64 crore. The list includes four Gear Grinding G 250 machines, four gear-shaping machines, six outside-diameter, or OD, grinding machines, six combined OD and internal-diameter, or ID, grinding machines, and six gear-hobbing machines.

The largest two categories by quoted value are the four Gear Grinding G 250 machines and six gear-hobbing machines, each estimated at ₹59.47 crore. Together, their ₹118.94 crore value equals about 52% of the ₹227.64 crore machinery estimate. Gear grinding is described as equipment for series production with low cycle times, while gear hobbing cuts external gear teeth using a rotating screw-like cutter called a hob.

The quotations for all five categories came from EMAG SU S.r.l. on July 21, 2026 or July 28, 2026. The OD and OD/ID grinding quotations are valid until July 20, 2027, while the gear-grinding, gear-shaping and gear-hobbing quotations are valid until July 27, 2027. Hero Motors used a conversion rate of €1 to ₹110.1303 as of August 14, 2026 for the cost estimates.

How certain are the machinery purchases and funding?

Hero Motors has not placed orders or signed definitive agreements for any of the 26 proposed machines. The company says it received quotations from suppliers, that it is not related to those suppliers, and that its promoters, directors, key managerial personnel and senior management have no interest in the proposed machinery purchase or the entities that provided quotations.

The ₹200 crore planned net-proceeds allocation is ₹27.64 crore below the ₹227.64 crore quoted machinery total. Hero Motors says equipment not purchased with net proceeds will be funded from internal accruals. It also says applicable taxes, freight, transit, installation, commissioning, transportation, packaging, insurance, duties and other statutory levies, where applicable, will be paid from internal accruals.

The cost gap is not necessarily fixed because Hero Motors says the number and nature of equipment may change with business requirements. It also states that there is no assurance EMAG SU S.r.l. will ultimately supply the machines or that the proposed equipment will be purchased at the quoted costs. No used or second-hand machinery is proposed for purchase from net proceeds.

What must happen for the capacity plan to meet its purpose?

Hero Motors must convert the projected growth in BEVs and electric motorcycles into additional powertrain orders for the proposed expansion to serve its stated purpose. The company links the investment to securing additional orders, while its fiscal 2025 powertrain utilisation of 82.83% provides the disclosed operating context for expanding that product line.

Execution also requires the company to choose suppliers and finalise equipment within commercial and funding constraints. The current quotations expire in July 2027, and Hero Motors has stated that it may revise equipment specifications or quantities as business requirements change. The company may additionally deploy the machinery at any existing or future plant based on management estimates, rather than exclusively at Gautam Buddha Nagar.

The proposed machinery allocation sits alongside a separate ₹190 crore use of net proceeds to repay, prepay or redeem certain borrowings. That repayment amount represented 44.49% of Hero Motors' ₹289.545 crore standalone borrowings outstanding on July 31, 2026. Internal accruals would therefore need to cover machinery costs outside the ₹200 crore allocation while the company also pursues the disclosed debt-repayment objective.

Conclusion

Hero Motors is pursuing a ₹200 crore powertrain-machinery programme while Gautam Buddha Nagar reported 76.61% total utilisation in fiscal 2025 and 82.83% powertrain utilisation. The disclosed logic is an EV-led growth plan and prospective orders, not a claim that facility-wide capacity is already fully used; the 26-machine estimate is ₹227.64 crore and leaves part of the expenditure to internal accruals.

The next developments to watch are whether Hero Motors receives additional orders, enters definitive supply agreements before the July 2027 quotation expiries, and keeps procurement within its stated funding framework. Hero Motors has disclosed that the equipment mix may change and that machinery may be deployed at other existing or future plants, leaving the final Gautam Buddha Nagar capacity addition unresolved.