Hero Electric resumes production, seeks up to Rs 200 crore to rev up output

Electric two-wheeler manufacturer Hero Electric has resumed production at its factory as of July, producing scooters in small batches. The firm is now seeking a fresh fund infusion of Rs 100-200 crore from both existing and new investors, including private equity funds, to gradually increase production to previous levels, according to sources.
 

Sources close to the firm indicate that Hero Electric has rejected claims from a segment of its 800 dealers, who allege that the company owes Rs 500 crore in advances for electric two-wheelers.
 

The company contends that the actual dues are much lower, around Rs 113 crore, and has already begun dispatching scooters to dealers following the resumption of production. The advances were made before the suspension of production.
 

The company has declined the dealers’ demand to repay 25 per cent of the dues by October, proposing instead to do so by December, with the amount to be adjusted against new scooter dispatches. However, this plan is contingent on securing supplementary funds. “The management has informed dealers that those wishing to resign will need to follow a due process, after which their dues will be settled,” said a source close to the company.
 

Last Friday, over 100 dealers protested at Hero Electric’s office and the home of promoter and managing director Naveen Munjal, demanding payment of their dues. The company, however, is unwilling to negotiate with this dealer association, which it considers not legally recognised,  and has already communicated its action plan to the dealers.
 

Hero Electric declined to comment on the issue until the time of going to press.

According to a source privy to the development, most dealers have supported the management’s efforts and expressed a desire to move ahead.

“The abrupt withdrawal of the subsidy by the Ministry of Heavy Industries, which was Rs 60,000 per vehicle, had an adverse impact across the entire ecosystem — affecting the company, dealers, suppliers, and employees. The government’s cessation of Rs 600 crore in subsidies, which the company had passed on to customers, strained the company’s working capital. As 60-70 per cent of this amount was depleted in one go, the company was forced to reduce and halt production,” the source pointed out.

The Ministry of Heavy Industries had suspended subsidies from September 2021 through March 2023, which the company had already passed on to customers. The ministry demanded repayment of Rs 133 crore plus interest, which the government had provided as subsidies from March to September 2021, citing alleged violations of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India-II eligibility requirements regarding domestic value addition. Hero Electric has challenged the ministry’s decision in court.