Hero Electric Vehicles will make an investment of Rs 700 crore by 2025 to rev up its business expansion, including setting up of a new manufacturing unit for which it has raised Rs 220 crore to part-fund the activities.
The company is planning to set up a new manufacturing facility with an annual capacity of 10 lakh units, besides raising production at its current plant at Ludhiana, Punjab, to three lakh units per annum from 75,000 units at present, as it targets to sell around 10 lakh units a year by 2025-26.
Apart from this, it is also ramping up research and development (R&D), marketing, dealer network expansion, along with expanding its supply chain, service network and charging stations in order to cash in on the growth in demand for its electric two-wheelers.
In order to fund these activities, the company has raised fresh capital in the form Part-1 of Series B funding of Rs 220 crore, led by Gulf Islamic Investments (GII). This is from the existing investor OAKS, which had invested in 2018 and a new investor, GII coming in.
While the fresh funds raised will be for meeting immediate requirements for expansion, the company will have to go for another round of fund-raise which is going to be much larger, possibly in 2022 and that will be again for even further expansion in terms of manufacturing and market.
Hero Electric is preparing for exponential growth in sales that it expects going forward, with the FAME-II Scheme increasing support for electric two-wheelers thereby accelerating demand.
In 2019-20, pre COVID-19 time, the company had sales of about 46,000 units. In 2020-21, despite the disruptions due COVID-19, it sold about 54,000 units and the company is targeting 100,000 units for 2021-22.
Overall, in the next five years, the company is looking at sales of a minimum of a million units per annum.