Hero Group’s Renewable Energy Arm, Hero Future Energies, Plans ₹3,500 Cr IPO

30 January 2025
3 min read
Hero Group’s Renewable Energy Arm, Hero Future Energies, Plans ₹3,500 Cr IPO
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Hero Future Energies (HFE), a part of the Hero Group, is preparing for a ₹3,500 crore initial public offering (IPO) to raise funds from the public. The company is in discussions with potential underwriters, with four investment banks expected to manage the share offering. Cyril Amarchand Mangaldas is likely to be appointed as the legal counsel for the IPO. The IPO will also allow existing investors like KKR and the International Finance Corporation (IFC) to reduce their stakes. The Munjal family is the controlling shareholder of Hero Future Energies.

Global Presence and Expansion

HFE has a significant presence in India, with its renewable power generation assets largely concentrated there. However, the company has expanded its operations to the UK, Ukraine, Singapore, Vietnam, and Bangladesh. The company's official headquarters are in the UK. In the UK, the company is focusing on battery energy storage and behind-the-meter projects, which involve installing renewable energy generation units at buildings or homes. In Bangladesh, HFE is undertaking solar energy generation projects for the fisheries sector, and in Vietnam, it is focused on rooftop solar projects. Hero Future Energies aims to deepen its footprint in Southeast Asia, where the demand for renewable energy is increasing. The company is also exploring opportunities in the Middle Eastern market through joint ventures.

Investment and Capacity Expansion

In September 2024, Chairman Rahul Munjal told Reuters at an industry event that Hero Future Energies plans to invest $20 billion over the next six years to scale up its capacity by nearly 16 times. This investment will include solar and wind projects, as well as battery storage. Recently, HFE signed a significant Memorandum of Understanding (MoU) with the Karnataka government, which involves an investment of ₹11,000 crore in green projects, including hydrogen production, and is expected to create 3,000 jobs. HFE recently commissioned a 29 MWp solar project in Chitradurga, Karnataka, which will serve commercial and industrial clients and produce 33 million clean energy units annually, reducing CO₂ emissions by over 31,000 tonnes.

Operational Assets and Power Offtake

HFE has 1.8 gigawatts of operational renewable energy generation assets in India, spread across seven states: Rajasthan, Maharashtra, Karnataka, Tamil Nadu, Telangana, Andhra Pradesh, and Madhya Pradesh. The remaining assets from its 5.2 gigawatts portfolio are under construction. Approximately 43% of the power generated by HFE's operational plants is sold through contracts with the Solar Energy Corporation of India (SECI). The rest of the power is sold through direct agreements with state distribution companies and captive customers such as the Hero Group.

Pre-IPO Fundraising and Market Positioning

Before the IPO, HFE engaged in a pre-IPO fundraising round with JP Morgan, seeking $200 million in equity. The company's strategy includes using a combination of internal funds, debt, and equity to boost its valuation post-IPO. HFE's IPO aligns with India's goal of achieving 500 GW of non-fossil fuel capacity by 2030. HFE will be competing with other major players in the renewable energy sector like Tata Power and Adani Green Energy. HFE plans to leverage Artificial Intelligence (AI) for grid optimization and energy storage.

Potential Challenges and Future Outlook

The execution of HFE’s expansion plans, navigating regulatory landscapes, and managing global supply chain issues will be crucial challenges for the company. The success of the IPO will depend on investor enthusiasm for clean energy and HFE’s strategic positioning. The company's track record in project execution and emphasis on innovation suggests a strong long-term trajectory. The IPO could also encourage other renewable energy companies in India to go public, potentially increasing investments in the sector.

Disclaimer: This news is solely for educational purposes. The securities/investments quoted here are not recommendatory.

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