Hero MotoCorp Ltd Management Discussions

Prelude

In FY 2023-24, Indias two-wheeler industry continued its transformative journey, reflecting the nations evolving mobility landscape. Strategic Partnerships and investments accelerated technological innovation and an expanded market reach for Indian two-wheeler manufacturers, enhancing global competitiveness.

Hero MotoCorp Limited (Hero) envisions leading Indias domestic industry to global prominence, leveraging its extensive portfolio targeting diverse market segments. Despite challenges like regulatory uncertainties and fluctuating raw material prices, Hero MotoCorps determination propels sustainable growth and technological leadership in Indias two-wheeler sector.

During the year, electric two wheelers adoption improved as government offered incentives, which led to efforts by players to develop cost effective models.

Economic Environment

Global

The global economy demonstrated unexpected resilience despite facing significant geopolitical challenges, severe banking sector stress, and conflicts in Ukraine and Israel, as well as a brief but intense tightening of financial conditions. The resilience is a result of several factors: stronger labour market growth supported a rebound in inflation-adjusted income, a delayed shift in growth towards service-driven sectors, a mitigated impact from tighter monetary policies due to healthy household and corporate balance sheets, and fiscal support in certain economies.

Easing inflation played a role in supporting economic resilience, driven by reduced supply constraints, alleviated labour shortages, cooling energy prices, and moderate demand growth. The global economic performance exceeded expectations, with a growth rate of 3.3%. Among major economies, the US and China experienced higher GDP growth in 2023 compared to 2022. However, economic growth in the Eurozone moderated due to weak consumer sentiment, persistent high energy prices, and weakness in interest-rate-sensitive manufacturing and business investment.

Easing inflation played a role in supporting economic resilience, driven by reduced supply constraints, alleviated labour shortages, cooling energy prices, and moderate demand growth.

Global Output (GDP) Trend (%)
	2022	2023	2024	2025
Global Output	3.5	3.3	3.2	3.3
Advanced economies	2.6	1.7	1.7	1.8
United States	2.1	2.5	2.6	1.9
Euro Area	3.3	0.5	0.9	1.5
UK	4.1	0.1	0.7	1.5
Emerging Markets	4.1	4.4	4.3	4.3
China	3	5.2	5	4.5
Russia	-2.1	3.6	3.2	1.5
Middle East & Central Asia	5.6	2	2.4	4
Sub-Saharan Africa	4	3.4	3.7	4.1
India*	7.2	8.2	7	6.5

[Source: WEO July 2024]

* For India, data and projections are presented on a fiscal year (FY) basis, with FY 2022/23 (starting in April 2022) shown in the 2022 column. Indias growth projections are 7.3 percent in 2024 and 6.5 percent in 2025 based on calendar year..

Global Trade Growth

Global trade in goods and services is expected to grow at around 0.3% during 2023, a decline from the average growth registered during the previous decade due to anaemic global industrial production. The services trade continued to recover from the effects of the pandemic, but at a slower pace than previously expected. Global trade growth is projected to pick up to 3.0% in 2024, reflecting a recovery of demand for goods in part and, more broadly, in trade by advanced economies.

Moderating Inflation

With energy and food price inflation ebbing and monetary policy turning restrictive, both headline and core inflation witnessed a decline in 2023. Goods price inflation declined to low levels in most countries, buoyed by lower energy commodity prices and the gradual easing of the chain bottlenecks from their earlier peak in 2021-22. The uptick in supply chain and the resultant growth have raised expectations of better economic growth globally, which will eventually also reflect on inflation.

Commodity Markets

The average prices of most commodities, in US dollar terms, fell in 2023 due to moderating demand. However, they remain elevated from pre-pandemic levels. Crude oil prices remained volatile during the year, including in the wake of the conflict in the Middle East. Natural gas and coal prices declined considerably in 2023, as countries in Europe reduced energy demand and maintained gas inventories above 90% of their storage capacity. Cumulatively, these factors led to energy price volatility in the recent past.

Outlook

According to the July 2024 update of the World Economic Outlook by the, global GDP growth is expected to stabilise at 3.2% in both 2024 and 2025. However, this forecasted growth rate falls considerably below the historical average of 3.8% (2000-2019), reflecting the impact of restrictive monetary policies, reduced fiscal support, and sluggish underlying productivity growth.

Global trade growth is projected at 3.0% in 2024, with a slight increase to 3.6% in 2025. These figures fall below the historical average growth rate of 4.9%, influenced by persistent issues such as rising trade distortions and geo-economic fragmentation, which continue to exert downward pressure on global trade levels.

Developed economies are projected to experience minor growth in 2024 and 2025. The Euro area is expected to rebound somewhat from a low growth period in 2023, while growth in the US is anticipated to moderate. Emerging markets and developing economies are forecast to sustain stable growth in 2024 and 2025, with regional variations. India remains an outlier, with strong anticipated GDP growth driven by robust domestic consumption.

Indian Economy

The global economy in the past few years has been marred by a number of challenges: highest inflation for the past four decades, major geopolitical conflicts, and what was probably and hopefully a one-in-a-lifetime pandemic. The Indian economy, however, navigated these challenges with ease, driven by policy reforms, building high-end manufacturing capabilities, improving competitiveness through sustained investments in infrastructure, and the use of digitalisation to drive financial inclusion. With a size of $4.1 trillion, India retained its position as the fifth-largest economy in the world.

Indias economic performance in FY 2023-24 demonstrated remarkable resilience and growth momentum, with the GDP expanding by a robust 8.2%, surpassing the 7.2% growth of the previous fiscal year. The standout performer was the construction sector, with a double-digit growth of 10.7%, indicating significant infrastructural development and investment activities. The manufacturing sector also contributed significantly, registering a commendable 8.5% growth rate. These sectors played pivotal roles in driving economic expansion and compensating for any sluggishness observed in the agriculture segment.

The stability in the interest rates maintained by Indias central bank, the Reserve Bank of India (RBI), played a crucial role in sustaining consumer confidence and fostering a conducive environment for economic growth. This ensured that borrowing costs remained manageable for businesses and consumers alike, facilitating investment, spending, and overall economic certainty and activity.

Overall, the robust performance of key sectors along with prudent monetary policy measures contributed to Indias impressive GDP growth in FY 2023-24, signalling resilience and potential for further economic advancement.

Furthermore, FY 2023-24 marked another milestone with a total gross GST collection of D 20.14 lakh crore, and 11.7% increase compared to the previous year. The average monthly collection for this fiscal year stands at D 1.68 lakh crore, surpassing the previous years average of_ D 1.5 lakh crore which supported the governments expenditure aspirations.

Indias economic performance in FY 2023-24 demonstrated remarkable resilience and growth momentum, with the GDP expanding by a robust 8.2%, surpassing the 7% growth of the previous fiscal year.

We have been actively investing in building a robust EV ecosystem, and have partnered with Ather Energy to establish an inter-operable fast-charging network for electric two-wheelers in India.

Leveraging digital public infrastructure to provide last-mile financial services has been a key factor in driving the countrys aspiration to become a $ 5 trillion economy. The Jan Dhan-Aadhar-Mobile (JAM) trinity has played an instrumental role in delivering government benefits directly to intended consumers and ensuring a higher degree of governance. Furthermore, the launch of the Open Network for Digital Commerce (ONDC) has been pivotal in democratising digital commerce in India, creating a level playing field for grassroots-level entrepreneurs and local retailers. At Hero MotoCorp, we have adopted evolving technologies as the first two-wheeler manufacturer on ONDC and have proactively invested in building a digital ecosystem to accelerate our next phase of digital growth.

The Government of India launched the Electric Mobility Promotion Scheme (EMPS) 2024 on April 1, 2024, to promote the adoption of electric two-wheelers and three-wheelers through demand incentives while driving the development of an electric vehicle (EV) manufacturing ecosystem in the country. We have been actively investing in building a robust EV ecosystem and have partnered with Ather Energy to establish an interoperable fast-charging network for electric two-wheelers in India. This collaboration will enable EV users to seamlessly utilise both VIDA and Ather Grids, offering close to 2,000 fast-charging points across 200 cities in India. Additionally, we have partnered with Zero Motorcycles to develop an electric platform for manufacturing electric motorcycle models.

Outlook

Over the past decade, the Indian economy has demonstrated remarkable growth driven by determination, creativity, and foresight, despite the various challenges. The economy has displayed resilience, leveraging adversities for advantages and progressing towards robust, sustainable, equitable, and comprehensive development.

The Indian economys growth trajectory remains strong, supported by macroeconomic and financial stability. The RBI forecasts a 7.2% growth rate for FY 2024-25, with headline inflation expected to gradually decline to target levels, nearing 4.5%.

Investment has been central to economic expansion. Government initiatives, including production-linked incentive (PLI) programmes, have been introduced with the objective of revitalising manufacturing, strengthening value chains, and expanding export capabilities.

The financial sector boasts healthy fundamentals, evidenced by robust non-food credit growth and improved household financial health, indicative of inclusive development.

Strategic measures have been implemented to enhance agriculture. The Minimum Support Prices (MSPs) for the 22 Kharif and Rabi crops have been consistently increased to ensure returns over the cost of production and boost sectoral growth and resilience.

Indias growth story underscores its ability to navigate challenges, adapt, and progress towards sustained economic prosperity.

Global Two-Wheeler Industry

The growth of the global two-wheeler market is propelled by several factors, including increasing urbanisation, rising disposable incomes, improved road infrastructure, and the demand for fuel efficiency and manoeuvrability in congested areas. Additionally, the expanding middle-class population and the adoption of electric and hybrid technologies for sustainability are driving market expansion. In 2023, the global two-wheeler market was valued at US $116.82 billion in 2023, and is projected to grow to US $123.54 billion in 2024 and US $215.96 billion by 2032.

[Source: https://www.fortunebusinessinsights.com/two-wheeler-market-106884]

Indian Two-Wheeler Industry

The Indian two-wheeler industry witnessed a healthy double-digit growth in FY 2023-24. This mushrooming demand comes from an aspirational India that instills confidence in personal mobility for progress. This quantum of growth was largely uniform across motorcycles (14%) and scooters (12%); with transforming landscapes at a segment level showing a wider spectrum.

The Indian two-wheeler Industry is the largest globally and continues to contribute to three-fourths of the overall automobile industry. A broad-based recovery has manifested in both urban and rural markets, a positive indicator for demand dynamics. Moderate inflation levels, upbeat GDP growths, stable and sturdy RBI monetary policies, and a healthy employment scenario continue to be the drivers of growth. The traditional socio-economic pyramid is gradually evolving to a more balanced diamond shape driven by the growing middle class. This inclusive growth benefits the two-wheeler industry.

Hero MotoCorp sold 56.2 lakh motorcycles and scooters across domestic and international markets in FY 2023-24. We grew 11% in revenue and 36% in profits. Through this remarkable performance, we have retained the coveted position of being the worlds largest manufacturer of motorcycles and scooters for 23 consecutive years, a testament to the trust and confidence bestowed by our entire stakeholder ecosystem.

The Industry forecast stays upbeat in terms of both short-term and long-term outlooks. India is positioned to remain the fastest-growing major economy, demonstrating resilience amid geopolitical challenges and supply chain pressures. The IMF, World Bank and rating agencies like Moodys, S&P and others have revised Indias growth upwards. These indicators augur well for the Indian economy and automobile industry.

Key Trends in the Industry

The growing aspirations of a progressive India have been expressed through the consumption of premium products, not just limited to two-wheelers but widely spread across four-wheelers, consumer durables, hospitality, and many other sectors. In a commuter-concentrated two-wheeler Industry like India, the growth has been largely anchored on 125cc and higher capacity premium segment models, cutting across both motorcycles and scooters. The aesthetic preference is witnessing an inclination toward sporty form factors and the models launched in this space have capitalised disproportionate growths. Our perpetual rejigging of the product portfolio and making it premium-rich corroborates this transformation. It sets us in the right direction toward serving the aspirational and evolving mobility needs of the Indian consumer.

The EV-ICE transition is propagating with a robust coexistence. Transforming the worlds largest two-wheeler Industry needs a balanced shift for a sustainable and regulated ecosystem to build. We are in the continued process of shaping our EV products, infrastructure and services to cater to the electrification momentum of the nation.

Increasing Demand for Premium and Performance Motorcycles

The Indian demography is riding high on economic development resulting in increased purchasing power and growth in aspirations. The gap between urban & rural affordability levels is gradually narrowing, mainly attributed to growing affluent target groups in both constituencies; manifesting in a constant uptick in the consumption of premium two-wheelers. 150cc and above motorcycles have grown at the fastest pace. This space has been seeing maximum launches across OEMs. More precisely, it is the 200cc and above sub-segment that has grown at 14% CAGR in the last 3 years; the highest among all the motorcycle segments. The scooter industry has a similar demand shift where volume contribution is shifting toward 125cc and above models.

Cognisant of these transitions, Hero MotoCorp launches were positioned across the growing segments— Xtreme 125R/160R 4V, Karizma XMR, Mavrick 440, and the H-D X-440 in motorcycles and Destini Prime in scooters. These spaces would continue getting reinforcements through a slew of launches in the times ahead.

The EV-ICE transition is propagating with a robust coexistence. Transforming the worlds largest two-wheeler Industry needs a balanced shift for a sustainable and regulated ecosystem to build. We are in the continued process of shaping our EV products, infrastructure and services to cater to the electrification momentum of the nation.

Prioritising Safety

Safety on the roads continues to remain a major focus for the automotive sector in India. Government mandates require safety features like anti-lock braking systems (ABS) and combined braking systems (CBS) to be standard in two-wheelers to reduce the risk of accidents. A bank angle sensor is available across all Hero two-wheelers that cuts off the engine when the two-wheeler tilts beyond 45 degrees, an important safety feature. At Hero MotoCorp, we are aware of the importance of advanced safety technologies and are proactively integrating them into our products to offer our riders the peace of mind and security they seek.

The Rise of Electric Two-wheelers

Growing consciousness towards the environment and low ownership costs are encouraging Indian consumers to make the shift towards electric two-wheelers. Various government policies, including the recently launched EMPS 2024 are further accelerating the growth of the electric segment. The increasing affordability and efficiency of lithium-ion batteries are increasing the significance of this segment within the industry. Further, growing charging infrastructure should also aid growth in the segment. We are focused on capitalising on the growth prospects in the electric segment and are working towards augmenting our portfolio.

The EV industry has made significant inroads in the scooter category, while penetration in the motorcycle category is at a nascent stage. Technology shifts undergo a gradual transition, and we envisage a robust coexistence of EV and ICE going forward.

Outlook

The Indian 2W industry has continued its progress on the U-shaped recovery and is inching closer to the pre-pandemic level with back-to-back double-digit growths. These are exciting yet vigilant times, as beyond aggregate growth, the constituent segments are witnessing rapid contribution shifts towards premiumisation. Our perpetual refresh of the product portfolio and making it premium-rich corroborates this transformation. It sets us in the right direction towards serving the aspirational and evolving mobility needs of the Indian consumer.

The industry forecast stays upbeat in terms of both short-term and long-term outlooks. India is positioned to remain the fastest-growing major economy, demonstrating resilience amid geopolitical challenges and supply chain pressures. The IMF, World Bank, and rating agencies like Moodys, S&P, and others have revised Indias growth upward. These indicators augur well for the Indian economy and automobile industry.

The projections are positive, and the industry is expected to continue to expand substantially in the next decade. The EV-ICE transition will witness a robust coexistence, and that will be our focus. Beyond products and services, we would stay heavily invested in revamping the consumer experience across our physical and digital touchpoints to delight ever-evolving consumer behaviour. Our, "Be the Future of Mobility," continues to ride high with the growth of the nation.

Making Strategic Progress

With the evolving two-wheeler industry landscape, the organisation is working on the strategic framework of ‘Changing Gears to lead the industry the way we have been doing it for the last 23 years consecutively. Synergy, Speed, Scale and Simplicity are the 4S mantras for driving efficiency in the value chain and staying ahead of the curve.

We have identified three key pillars powered by Innovation, digitalisation, and services; significant strides have been made under each pillar.

Changing Gears: The Four Pillars

Grow the Core

The 100/110cc motorcycle industry continues to be the largest contributor to the Indian Two-wheeler Industry and our strong foothold in this space remains uncontested. As our customers have started moving up the ladder towards products of higher cubic capacities, we must draw new-entrants into this space to replenish the void. Expanding the segment to new first-time buyers is the epicenter of actions to grow our core.

Attaracting First-Time Buyers

The relaunch of the Passion+, HF Deluxe, and Splendor Xtec models was strategically executed to capture first-time buyers in the market. Passion+ successfully captured approximately 71% of first-time buyers, while HF Deluxe, strategically priced in key markets to improve affordability, captured around 70%. Additionally, Splendor Xtec, launched in May 2022, attracted

The Passion+, HF Deluxe, and Splendor Xtec models was strategically executed to capture first-time buyers in the market.

approximately 45% of younger first-time buyers, contributing to the brands expansion in this demographic.

Increase Market Share in the 125 cc Segment

125cc is a fast-growing segment and we have a 3-brand strategy to increase both volumes and market share. With the launch of Xtreme 125R, our 125cc motorcycle portfolio has a wide range of choices for the customer across commuter, stylish and sporty sub-segments.

- Driving connect with the youth – The recently launched Xtreme 125R has received an overwhelming response and we are continuously ramping up our capacity to meet the demand. With a slew of first-in-class and best-in-class features, the product is well-received. Strategically positioned around young consumers, association with BGMI (Battlegrounds Mobile India) is an innovative initiative to engage with the gaming community.

- Emphasising Mileage Superiority – A compelling campaign highlighting the impressive 69 KMPL fuel efficiency of the Super Splendor XTEC is striking chords with consumers across the markets. This is being communicated through contextual messaging across various media.

- Driving Brand Advocacy – The relaunch of Glamour Magnetic has spiralled up the volume and market share of the Glamour family in the core markets; marking a promising resurgence. The trust of over 8 million customers who love this iconic brand is driving advocacy for new customers to join the Glamour family.

Increase Share in Scooters

While the scooter portfolio has grown in volume; in the 110cc sub-segment, Hero was the only OEM to grow in market share. However, the goal that we have set out for us is much higher. Owing to dual transitions of EV-ICE coexistence and a shift towards 125cc and above, we are embarking on transforming Hero scooters and reimagining the entire segment. We have structured our strategy around four key pillars:

- New Product Interventions: The scooter industry is experiencing a notable shift, with 125cc scooters growing by over 30% and accounting for 47% of the market. Capitalising on this trend, we have an array of launches lined up in the form of Destini 125 in a completely new avatar and an expansion of the XOOM portfolio across higher cc, and more powerful & sporty platforms.

- Leveraging Performance Category: Consumer insights highlight a clear demand for performance-oriented scooters. With our XOOM portfolio, we aim to establish XOOM as a powerhouse brand, focusing on youth and exploration.

- Dialling up the Commuter Category with Destini: The commuter category represents 70% of the market, and our Destini 125 and Destini Prime are strategically positioned here. We plan to deploy a flanking strategy with Destini Prime and the new avatar of Destini to redefine value and capture a larger share of the market.

- Revitalising Pleasure: Hero Pleasure has been a popular model among women riders. This year, we aim to revamp and strengthen the models appeal by augmenting the value proposition along with vibrant, youthful, and regionalised communication to enhance its brand image and attract a broader audience. Pleasure would also serve as the entry price positioned model in the scooter category.

Making Finance More Accessible

During the year, we unveiled a new retail finance marketplace to simplify vehicle financing for our customers. Available through primary dealers, the platform already features 10 financiers, including Hero FinCorp Limited (HFCL), five private banks, and four NBFCs. The marketplace offers diverse financing options, allowing customers to compare rates and terms conveniently. It can be applied for online or through Hero MotoCorp dealers, marking a significant step towards enhancing the purchasing experience.

Key Features of the Retail Finance Marketplace

- Wide range of finance options from multiple lenders

- Competitive interest rates and terms

- Convenient online application process

- Paperless process

- Quick loan approvals

Benefits for Dealers

- Increased customer satisfaction

- Improved sales conversion rates

Benefits for Financiers

- Access to a large pool of potential customers

- Streamlined loan application and approval process

- Reduced risk of defaults

The marketplace is a win-win for customers, dealers, and financiers. It provides customers with a convenient and hassle-free way to finance their vehicle purchases, dealers with increased sales conversion rates, and financiers with access to a large pool of potential customers.

Focused on the Top 10 markets in Global Business

Globally, our focus markets are Bangladesh, Colombia, Turkiye, Mexico, Nepal, Guatemala, Nigeria, the DRC, and the Philippines. We are augmenting our presence in these target markets through focused products and distribution strategies.

We prioritised the implementation of NextGen Visual Identity globally to enhance the customer experience and maintain competitiveness. Efforts were made to expand our network for broader market coverage and improved customer accessibility. We focused on 24/7 parts availability to boost satisfaction and loyalty. The ‘Wheels of Trust platform for exchanging used vehicles was successfully tested in Bangladesh. Additionally, 18 new and refreshed products were launched, and digital initiatives like DMS, Global Website Restructuring, and a Lead Management System through SAS were initiated.

Build our portfolio

Our vision is resolute – to establish ourselves as the leading premium two-wheeler brand in India, under the guidance of our Chairman, Dr. Pawan Munjal and uphold the highest standards of excellence. Recent launches, viz. the Xpulse and Xtreme has transformed customer perceptions. With four out of eight products launched last year in the premium category, including three in the fastest-growing 200cc+ segment, we now cover all premium subsegments. Our successful launches, viz Xtreme 160R 4V, Karizma XMR, Harley-Davidson X440, and Mavrick 440, are signs of the progress we have made so far. While considerable work has been done thus far in this segment, FY 2024-25 will see us extend our product launches further.

With an aim to create a new era of premium customer experience, we launched our flagship store – Hero Premia. The first dealership was launched in October 2023 with nine stores by the end of FY 2023-24, receiving positive customer feedback and increasing sales conversion.

Build Aspirational Power Brands

We are developing five power brands in the premium segment –the Xtreme, Xpulse, Karizma, Mavrick, and X440 – each with a distinct and aspirational identity based on unique codes (such as Xtreme=Fastest, Karizma=Above All). The brands will be strengthened through our 4C framework of Culture, Collaboration, Community, and Content.

Elevate the Retail Buying Experience

With the aim of creating a new era of premium customer experience, we launched our flagship store, Hero Premia. The first dealership was launched in October 2023 with nine stores by the end of FY 2023-24, receiving positive customer feedback and increasing sales conversion. Hero Premia is designed to deliver unrivalled premium sales and service to customers. The Premia stores feature modern architecture, appealing design, and new-age digital technologies.

Premium Customer Journey: Physical + Digital

At Hero MotoCorp, we are committed to providing an unmatched customer experience to our customers. In addition to the high-quality experience at our stores, we have actively adopted digital tools to deliver differentiated value. During the year, we appointed 75 exclusive stores. These stores will offer exceptional customer experiences through a blend of premium portfolio selection, phygital customer journeys that seamlessly integrate physical and digital interactions, and immersive sensorial experiences. Our store layouts are thoughtfully designed with pre-defined planograms and a choice of prime locations to ensure accessibility.

Our staff are trained in soft skills to enhance customer interactions. Leveraging data analytics, we personalise marketing strategies to drive targeted traffic and engagement. We introduce interactive 3D configurations and AR try-on experiences for engaging buying journeys. Additionally, our unified app offers differentiated service experiences. We actively engage customers through various digital platforms to enhance connectivity and responsiveness.

Hero One App

Hero One app helped us augment our digital engagement with customers. During the year we strengthened the app by introducing self-evaluation of used two wheelers.

Scaling up the Hyperlocal Platform

We rolled out Hyperlocal across 100% dealerships. This initiative enabled dealers to effortlessly launch digital-first campaigns using Google and Meta platforms in just three simple steps.

Reputation Management

We launched the next-gen Online Reputation Management with personalised responses, to strengthen our digital reputation.

Igniting a Culture of Racing

Hero XDrags

This year, Hero MotoCorp ignited a culture of racing through the launch of two innovative intellectual properties (IPs) - Xtracks Time Trial Season 1 and Xdrags Cult.

Xtracks Time Trial Season 1:

This first-of-its-kind FMSCI-approved off-road race event was centered around the Xpulse 200 motorcycle. Featuring four categories for both amateur and professional riders, Xtracks Time Trial championed inclusivity and fair competition. The inaugural event attracted over 400 participants across 5 cities, culminating in a thrilling final with over 50 contestants vying for victory.

XTracks

This first-of-its-kind FMSCI-approved off-road race event was centered around the Xpulse 200 motorcycle. Featuring four categories for both amateur and professional riders, Xtracks Time Trial championed inclusivity and fair competition. The inaugural event attracted over 400 participants across 5 cities, culminating in a thrilling final with over 50 contestants vying for victory.

Xdrags Cult:

Xdrags Cult, a groundbreaking platform launched this year, ignited a passion for drag racing among enthusiasts. This innovative initiative showcased the power and agility of the Xtreme 160R 4V within the underground racing scene.

Beyond the adrenaline rush of competition, Xdrags Cult fostered a vibrant subculture by integrating artistic expressions like B-Boying, Beatboxing, Graffiti, and Rap. This unique fusion of speed and creativity resonated with participants and spectators alike, creating a platform where artistic talent and competitive spirit converged.

Elevating Racing Prominence:

Further bolstering its commitment to off-road racing, Hero MotoCorp partnered with prestigious events like the Rally of Himalayas and the Ultimate Desert Challenge, enhancing the Xpulse 200s visibility within the competitive landscape.

Engaging with Next Gen:

As the two-wheeler partner for leading colleges, we participated in over 8 festivals, attracting over 100,000 attendees and generating over 5,000 engagements. These events featured product zones, stunt shows, motorcycle displays, and test rides, along with integration of Xtracks and Xdrags, fostering a dynamic and engaging experience for students.

#SHERIDES Empowering Women Riders:

In celebration of International Womens Day, we launched the ground-breaking #SHERIDES programme. This initiative kicked off with an inspiring all-women motorcycle rally, signifying a major step forward in empowering female employees through motorcycle riding. #SHERIDES goes beyond a single event; its a comprehensive programme designed to equip women with the skills and confidence to ride safely and independently. This initiative underscores Hero MotoCorps unwavering commitment to gender equality and womens empowerment within the motorcycle community.

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Women riders on 2 rides

Operational Highlights

To enhance efficiency across all levels of our operations, we are leveraging digitalisation, prioritising safety, adopting environmentally friendly processes, and fostering an inclusive and supportive work environment for our teams. Our ongoing investments aim to cultivate a culture of innovation and high performance within our Company.

Promoting Sports

Sports have been an integral part of our journey. As a global two-wheeler powerhouse, we have deeply invested in supporting sports across disciplines and geographies. Our commitment to sports goes beyond sponsorship; it is about fostering a culture of excellence and passion among the youth.

We support multiple sports disciplines both in India and internationally, including cricket, football, hockey, table tennis, and golf. Hockey, being the national sport of India, holds a special place for us. With Sardar Singh, one of the top international players and stalwarts of Indian mens hockey, as a brand ambassador, we are working to popularise the game and support young talent. In football, a sport extremely popular in Europe, LATAM markets, and parts of Africa, Heros association with Atl?tico de Madrid serves as a long-term gateway to Europe and helps build the LATAM markets further.

With international brand ambassadors like Tiger Woods in golf, Diego Simeone in football, and Virat Kohli in cricket, we have been propelling the brand forward to become truly global. Our association with the European Tour and the PGA Tour helps grow its network beyond business, providing opportunities in regions where we ultimately plan to establish our footprint, especially in Europe and the US.

Hero has been instrumental in popularising golf in India. Through the sponsorship of major golf tournaments and support for budding golfers like Diksha Dagar, Pranavi Urs, Tvesa Malik, and professional golfers like Shiv Kapur.

Diversity plays a key role in Hero. Sports, being one of the most diversified domains, provide a perfect platform to promote inclusivity and equal opportunities. Cricket, the most followed sport in India, highlights Heros effort to support diversity. Heros association with Smriti Mandhana and Jemimah Rodrigues from the India Womens Cricket team substantiates this commitment to diversity and inclusion. By investing in various sports, Hero supports athletes from different backgrounds and ensures that its vision of a vibrant and dynamic youth is realised.

Heros vision extends beyond mere sponsorship; it is about making a tangible impact. Heros ongoing investment in sports is a testament to its commitment to the nations future and its belief in the power of sports to bring about a positive change.

Parts, Accessories and Merchandise (PAM) Business

To expand our non-product revenue stream, we have been ramping up our Parts, Accessories, and Merchandise business portfolio, which includes Spare Parts, Engine Oil, Bike Care Products, Tyres, Batteries, Merchandise, and Accessories. This business aligns with our strategic aspirations while providing added value to our customers. Through pioneering micro distribution and doubling our retailer base inspired by the FMCG model, we have significantly improved accessibility and convenience for our customers. The result is that we clocked a revenue of H 5,387 crore, reflecting a growth of 11.4% over FY 2022-23.

Our Global Parts Center (GPC), located in Neemrana, Rajasthan, offers a storage capacity of around 26,000 SKUs (Stock Keeping Units). We have fully optimised this facility to make the most of our existing capacity. Additionally, we have earmarked an investment of H 600 crore in Andhra Pradesh over the next two years to establish a state-of-the-art Global Parts Center 2.0 in Tirupati. This strategic investment underscores our commitment to enhancing our operational capabilities and strengthening our presence in the region.

Cost-saving Initiatives

Our teams work relentlessly to enhance productivity through various initiatives directed towards reducing work content, optimising variable manufacturing costs by improving tooling, consumables, energy efficiency, and yield. The cost-saving initiatives initiated across our plants during the year included:

Dharuhera Plant

- In-house upgradation of old machinery and equipment such as welding robots etc.

- Elimination of NT units in Fine Boring machine

Gurgaon Plant

- Complete knock down (CKD) cluster packaging development in corrugated boxes for Colombia exports

- Logistics cost reduction for transfer of engines to other plants

Haridwar Plant

- Load optimisation of outbound logistic trucks

- Machines, fixtures and layout optimisation

- Capacity and multi-model flexibility enhancement, among others

Neemrana Plant

- Thermo Setting Acrylate (TSA) Paint instead of Polyurethane (PU) paint in the premium models

Global Parts Center

- Outbound logistics cost optimisation through right-sizing of trucks

- Packaging cost optimisation through packaging modification and specification optimisation

Halol Plant

- Conducted store re-engineering by merging engine assembly and machine shop Direct on Line (DOL)

- Natural gas saving through magnetic field generation before burning

Tirupati Plant

- Use of Electronically Commutated (EC) fans in place of conventional Centrifugal blowers in Air Handling Units (AHU) in air conditioning systems for energy-saving

- New processes like cell sorting and grading, surface treatment (Plasma Cleaning), Integrated Chemical dispensing and laser marking were incorporated into the new battery pack assembly line

Branding and Marketing

The values of energy, enthusiasm, and determination embraced by Hero enable them to deeply resonate with todays youth. Our initiatives are crafted to align with our premiumisation strategy, delving into diverse activities to resonate with our target audiences. These activities encompassed advertisement campaigns, the launch of experience centres, and event sponsorships. We believe biking transcends gender, as evident in our women-specific biking events like the #SHERIDES. Our outreach extended through rallies and tailored events, amplifying the broad appeal of our engagements.

Hero GIFT Campaign

The impactful Hero GIFT campaign during festive season this year achieved a highest reach for Heros campaign. During the Cricket World Cup, we captured over 448 million eyeballs to drive quick awareness for our newly launched models. At 26%, our heavy digital media mix resulted in a 2.7x increase in digital enquiries, complemented by over 15.4 lakh square feet of OOH advertising, helping us drive awareness for new product launches. We saw a significant increase in website traffic with 1.9 million visitors (nearly 2x over last year) and complemented by "Always-On" lead nurturing module via a WhatsApp.

The adoption of new channels such as hyperlocal drives positively impacted inquiry generation, resulting in over 10,000 sales with a notably higher conversion rate. Additionally, our Hero One App has made a significant contribution to driving conversions. We have also capitalised on innovative digital formats like IAR filters and personalisation techniques to effectively engage with a younger audience, showcasing our commitment to adaptability and innovation in marketing strategies.

- Driving the premium imagery for the brand at Indias largest motorcycle festival, ‘India Bike Week, with an engaging display of premium motorcycles and a one-of-a-kind ‘XClan Rally with over 100+ enthusiastic motorcyclists riding to the festival on Karizma and XPulse

- The successful conclusion of XTracks Time Trial Season 1 with a grand finale at Shiva Valley in Pune, featuring over 400 participants from five city rounds

- Launched the #SHERIDES programme on International Womens Day with an all-women rally

- The Hero Indian Open 2024, held in March, united golf pros, enthusiasts, and celebrities in a spirited showcase of skill and camaraderie

- Hero Family Day celebrations marked 40 years of our iconic journey and the centennial year of our Hero Forever, Dr. Brijmohan Lall Munjal

- First-time-ever brand integration with gaming platforms ‘Playground and ‘BGMI Krafton to connect with younger first-time buyers

- Continue building engagement with ~50 on-ground events (XDrags and XTracks) along with an experiential ride at Rann of Kutch for Mavrick 440

- Modernised the brands narrative with a progressive marriage season campaign ‘Rishta Aisa, Dosti Jaisa that led to 1 million+ website visitors

Customer Experience Index

Over the past few years, we have been capturing customer buying experiences at our showrooms through an external partner. We continuously update survey parameters and methodology based on scope and business priorities. This survey, known as the Hero Happiness Score, integrates the NPS Score with Dealer MyScore for comprehensive insights into customer satisfaction. Further, we also conducted the Customer Purchase Experience Survey for our secondary channel partners.

90.4

Customer Experience Index

66.8

Net Promoter Score

Our Enterprise-wide Quality philosophy is designed to uphold our undying commitment to excellence by ensuring robust quality management practices across our entire value chain.

Committed to

Enterprise-wide Quality

Since its inception as a centralised vertical in 2020, our Quality function has expanded its scope to include Heros entire value chain, from design and development to manufacturing and supply chain management to service and customer satisfaction. Our philosophy of Enterprise-wide Quality is now materialising in every aspect of our operations. Key Quality KPIs are part of all relevant stakeholders performance metrics and strategic initiatives, ensuring Company-wide alignment on Quality as a strategic priority.

Our Enterprise-wide Quality philosophy is designed to uphold our undying commitment to excellence by ensuring robust quality management practices across our entire value chain. We have achieved this through rigorous design verification, validation, and meticulous product development practices, as well as by creating world-class manufacturing infrastructure, processes, and systems across our suppliers and manufacturing locations. Our state-of-the-art testing infrastructure for engines, chassis, EVs, NVHs and reliability testing, and NABL-accredited Quality Labs is a testament to our world-class testing and validation standards.

The Quality mandate aligns with our 4S mantra of Synergy, Speed, Scale and Simplicity. Innovative projects such as the digital quality incident management system, digital quality gates, auto-inspection system, Product 360, end-to-end digitisation of change management, Process Quality Control Sheet (PQCS)/control plans digital repository, and real-time monitoring of end-of-line testing at supply chain partners are being developed and executed.

We have enhanced our design quality frameworks through strategic initiatives, including a comprehensive Lessons Learnt Repository and robust Design Failure Mode Effective Analysis (DFMEA) and Process Failure Mode Effective Analysis (PFMEA) systems, incorporating all previous design inputs and key stakeholders. This proactive approach ensures efficient management of potential concerns and continuous improvement, reducing new model Engineering Change Note (ECN).

We support our supply chain partners by upgrading their quality management systems through technical and managerial expertise. Building on previous initiatives, we have conducted sustenance audits for process improvements, digitisation for automated monitoring of Critical to Quality parameters, 4M restoration projects, traceability to mitigate product recall risks, and sensitisation workshops for Tier 2 partners in collaboration with Tier 1 suppliers.

Our focus on enhancing supplier capabilities for premium offerings like the Harley-Davidson X440, Mavrick 440, Karizma XMR, and Xoom 160 includes initiatives to elevate aesthetic quality through benchmarking and best practices. We are developing new aesthetic quality standards for critical components.

Our Supply Chain Partner Quality Manual outlines guidelines for effective functioning, with stringent checkpoints at various product development and production stages. Regular training and awareness sessions for shop floor employees and supply chain management ensure adherence. We launched the PULSE initiative with the Gurukul at our Dharuhera plant to develop Quality Champions across all partner locations.

Our Vendor Quality Rating (VQR) framework monitors and analyses critical quality parameters of supply chain partners, forming the basis for strategic initiatives aimed at achieving zero defects, zero delays, and zero waste. Projects include process benchmarking, model lines with zero defects, rejections, breakdowns, or safety issues, and digital monitoring of poka-yoke. Concurrent engineering practices optimise lead times in new product development, aligning with our vision of quality as the cornerstone of customer satisfaction.

At our in-house manufacturing facilities, we have further complemented our best-in-class practices and systems through the adoption of technology and artificial intelligence (AI) to:

- Upgrade our export packaging lines ensuring defect and damage-free packaging and last-mile delivery

- Achieve a Process Capability of 1.67 for our Critical to Quality (CTQ) parameters in machine shops

- Achieve significant QA rate improvement to prevent defect generation and market complaints

Innovative poka-yoke such as Direct current (DC) Battery Pulse tools for critical torque confirmation and interlocking with conveyors are an integral part of our defect prevention strategy across all our manufacturing locations.

As a proactive risk-mitigating measure, we have completed the traceability of all the critical safety and emission parts covered under the scope of the recall policy (whether manufactured in-house or at supplier facilities). This helps us flag any defect or concern before it reaches our channel partner or customer.

We encourage a culture of quality across our value chain, engaging stakeholders to achieve excellence. The 2023 World Quality Month theme, ‘Realising Your Competitive Potential, guided our endeavours towards this vision. Through various avenues, such as leadership communications and collaborations with suppliers, each interaction led us forward in our pursuit of quality.

Building upon the momentum established last year, we are strengthening our commitment to quality across Hero MotoCorps entire value chain.

Hero NEXT

The Hero NEXT initiative was launched in November 2021 to spotlight operations and propel them to higher levels of performance in critical business parameters and focus areas. It is strategically designed to promote innovation, sustainability, and competitiveness and nurture collaboration and teamwork in alignment with the core TPM principles.

The first cycle of the Hero NEXT initiative was rolled out in 2022 for both the tracks, i.e., the Operations track (including the first Global Kaizen Conclave, the Plant and Pillar assessments, and the Sustainability assessments) and, the Supply Chain track (with the evaluations focused on Performance Awards, Leadership Awards and, the GPDP assessments for the Sustainability Awards). Projects and evaluations were conducted throughout the fiscal year. The first cycle culminated with the Global Conference at Udaipur in November 2022, where the winning teams from our plants and supply chain were felicitated in the presence of our top leadership.

In the second cycle of Hero NEXT, the Operations teams presented 81 projects under 10 thematic categories at the Global Kaizen Conclave, with these projects resulting in substantial cost savings and optimisation (H 45+ crore). Diversity in the assessor panel was ensured by including three experienced female assessors in Plant and Pillar and Sustainability assessments. The 2^nd cycle saw 1,450+ employees participate across all our locations, and 300+ were recognised for their contribution. In line with Heros philosophy of ‘We Care, the first-ever Health and Wellness assessment was also conducted in this cycle, which culminated with the grand celebrations at the

Hero NEXT and Hero QUEST Global Conference 2023-24.

Hero NEXT and Hero QUEST Global Conference 2023-24

The second edition the Hero Hero NEXT and Hero QUEST Global Conference celebrated excellence across our manufacturing facilities and extended value chain. Insightful conversations with the leadership and engaging intellectual activities were conducted to inspire our teams to strive for excellence and enterprise-wide quality. This platform aims to promote and inspire excellence, unleashing energy and enthusiasm in Operations and Quality to accelerate innovation and transformation. Acknowledging the resilience and go-getter mindset of our Heroes, our Executive Chairman, Dr. Pawan Munjal, acknowledged and appreciated their contribution towards our Companys market dominance in the last two decades and also shared the key focus areas for the coming years.

Development of Channel Network

Our goal is to establish a channel that is future-ready by optimising and innovating channel formats to provide a seamless experience across different locations through standardised channels.

We have seen significant progress in our flagship project, Hero 2.0, with 418 activated dealerships showcasing a new visual identity. In its phygital form, the customer journey becomes more experiential and enabled, thereby enhancing the overall customer experience. Additionally, secondary network transformation initiatives are ensuring consistent customer experiences across all channels. To ensure a robust review mechanism, new frameworks have been implemented to monitor and support channels regularly, effectively contributing to our business goals.

Driving premiumisation with Premia

Premia, our flagship project driving premiumisation, was launched in FY 2023-24. The pilot phase commenced in the second quarter of the year, with three pilot stores inaugurated in the third quarter, demonstrating a high-speed execution approach. By the end of the year, we achieved 75 appointments and nine activations. This rapid expansion was made possible through strong synergy among departments including Sales, Customer Experience, Marketing, Procurement, PAM, and our dealer channel partners. Hero Premia, the hub of Hero Premium Biking, is poised to become the fastest-scaling automobile retail channel in India. Our expansion strategy targets key urban centres and regions based on market potential, with plans to explore Premia-studio setups in Tier 2/3 towns to broaden our reach.

Aligned with our sustainability commitment, we have moved forward with the Green Partner Development Programme, focusing on creating green dealerships through initiatives like biodegradable products, cool roofs, solar energy adoption, dry washing, and water recycling.

To keep our channel partners updated with the latest in the industry, we initiated multiple learning programmes in partnership with leading business institutes and introduced focused initiatives like ‘Succession Planning and ‘Channel Onboarding Programme this year.

Furthermore, in collaboration with BML Munjal University, we launched the Women in Successful Entrepreneurship (WISE) programme to empower our women dealer entrepreneurs.

Financial Performance
Particulars	FY 2023-24	FY 2022-23
Motorcycles and Scooters Sold (No. of units in lakhs)	56	53
Income (D crore)
- Revenue from Operations	37,456	33,806
- Other Income	893	565
Total Income (D crore)	38,348	34,371
Expenses (D crore)
- Cost of Materials Consumed & Changes in Inventories	25,431	23,858
- Employee Benefit Expenses	2,402	2,190
- Other Expenses	5,097	4,448
Total expenses (D crore)	32,930	30,496
Profit Before Tax (C in crore)	5,258	3,875
Tax Expense (C in crore)	1,290	964
Profit After Tax (C in crore)	3,968	2,911
Other Comprehensive Income (C in crore)	(22)	(9)
Total Comprehensive Income (C in crore)	3,946	2,901
Earning per Equity Share on Profit After Tax (C)	199	146

Movements in Balance Sheet Figures

Key Financial Ratios			(%)
Particulars	FY 2023-24	FY 2022-23	Change
Trade Receivables Turnover Ratio	17.34	16.75	3.55
Inventory Turnover Ratio	17.67	18.66	(5.30)
Interest Coverage Ratio	309.12	212.02	45.79
Current Ratio	1.50	1.61	(6.84)
Debt Equity Ratio	0.01	0.01	0.00
Operating Profit Margin (%)	12.13	9.85	23.19
Net Profit Margin (%)	10.35	8.47	22.19
Return On Equity (%)	22.88	17.92	27.67

Commentary

Trade receivables turnover ratio – The debtor turnover ratio increased from 16.75 times in FY 2022-23 to 17.34 times in FY 2023-24 primarily due to higher revenues signifying improved efficiency in collecting outstanding debts.

Inventory turnover ratio – The inventory turnover ratio has witnessed a decrease from 18.66 times in FY 2022-23 to 17.67 times in FY 2023-24. This decrease mainly on account of increase higher average inventory levels. Interest coverage ratio – The interest coverage ratio has increased by 45.8% primarily due to higher profits during the year. A higher interest coverage ratio indicates better financial health and the ability to meet interest obligations comfortably. Current ratio – The current ratio has decreased marginally from 1.61 times to 1.50 times, on account of a larger increase in current liabilities. The current ratio is a measure of a companys ability to meet its short-term obligations using its current assets.

Operating Profit margin (%) – Operating profit margin for the year has increase from 9.85% to 12.13% on account of higher revenues, stable commodity cost and better returns on spends.

Net Profit ratio /margin (%) The net profit margin has experienced an increase from 8.47% to 10.35%, primarily attributable to healthy operating margins and higher other income.

Return on net equity / net worth (%) – The increase in profits has resulted in a notable improvement in the Return on Net Worth, which has increased from 17.92% to 22.88%. The improved Return on Net Worth indicates improved efficiency in utilising the Companys resources to generate profits.

Human Resources

At Hero MotoCorp, we prioritise nurturing our human capital to foster a vibrant and inclusive workplace culture. Our focus is on talent development, ensuring continuous learning and growth opportunities for employees. We value our people as key drivers of success, invest in their development and overall satisfaction, encourage innovation and collaboration, and recognise and reward outstanding contributions. Our people initiatives align with our commitment to sustainability, the promotion of green practices, and responsible corporate citizenship. We are focused on driving employee diversity and have taken significant strides during the year to enhance diversity within our Company.

Employee Engagement

Our initiatives during the financial year under review highlight our dedication to employee engagement and community involvement. From the HERO Premier League Season 6 at the Gurgaon plant to vibrant celebrations, including the Independence Day event in Dharuhera, emphasising unity and patriotism, and our participation in the Vedanta Pink City Half Marathon to promote fitness and community engagement, we inculcate a culture of teamwork and celebration. Additionally, engagement is also facilitated through various activities, such as Long Service Awards that honour employee dedication and commitment, underscoring Heros appreciation for loyalty and hard work.

Read More on page 92

Corporate Social Responsibility

At Hero MotoCorp, we are dedicated to empowering communities and fostering sustainable development. We prioritise education, healthcare, environmental conservation, and community development initiatives that make a meaningful impact. Our community development efforts aim to create positive change for the planet and contribute to building stronger, healthier communities. Hero MotoCorps commitment to CSR reflects our values and dedication to social responsibility.

Read More on page 94

Risk Management

In our pursuit of excellence, it is imperative to address both internal and external vulnerabilities through a comprehensive risk mitigation strategy. Effective risk management serves not only to safeguard against external accidents and minimise the impact of internal challenges, including product recalls, but also to ensure business continuity and preserve our brand reputation.

This commitment to risk management is integral to our business operations and is overseen diligently by our dedicated risk management committee (RMC), a committee of the Board of Directors. By proactively identifying and sharing sharing updates and mitigation plans as well as emerging developments with the RMC, we reinforce our resilience through business continuity planning (BCP) and our ability to navigate challenges, thereby sustaining trust and confidence in our brand within the competitive marketplace.

O Read More on page 64

N

Internal Controls

We have a robust internal controls framework deeply ingrained in our Company. The Audit and Assurance function plays a vital role in providing assurance to the Board regarding the adequacy and effectiveness of these controls. Additionally, it advises management on the ever-evolving risk landscape, helping anticipate and mitigate emerging risks.

Our internal audit plan is developed collaboratively with management, considering the needs of statutory auditors and focusing on critical risks aligned with the companys objectives. Key findings from internal audits are reviewed by the Audit Committee quarterly, which also monitors the progress of management actions resulting from these reviews.

We embrace technology to enhance internal audit procedures. Automation, along with tools such as data analytics, artificial intelligence, and machine learning, is being utilised to implement continuous monitoring, ensuring a proactive approach to risk management.