Hero Electric's bankruptcy: EV pioneer faces insolvency over Rs 301 cr debt

Hero Electric, India's first e-scooter maker, enters insolvency under IBC with Rs 301 crore in admitted claims; bidders invited as creditors decide its fate amid EV market growth

Hero Electric, the country's first electric scooter manufacturer, is undergoing insolvency resolution under the Insolvency and Bankruptcy Code (IBC) over Rs 301 crore debt. The resolution professional (RP) has invited bids from potential investors for the financially distressed company.  

 

Timeline for bidding and resolution

 

The invitation for expressions of interest was issued on February 18, with a submission deadline of March 14. Following this, a final list of eligible bidders will be released on April 8. The final resolution plans must be submitted by May 13.  

 

Hero Electric entered insolvency proceedings in December 2024 due to a default of Rs 1.85 crore. The total admitted claims from creditors now exceed Rs 301 crore, according to documents reviewed by The Economic Times.

 

 

Among these claims, Rs 82 crore is owed to major lenders, including Bank of Baroda, Kotak Mahindra Bank, South Indian Bank, and IDFC First Bank. These creditors hold 100 per cent of the voting rights in the Committee of Creditors (CoC), which will decide the company’s fate — either restructuring or liquidation.  

 

Bank of Baroda holds the majority voting power at 66.92 per cent, followed by South Indian Bank (21.03 per cent) and IDFC First Bank (11.40 per cent). Kotak Mahindra Bank has less than 1 per cent voting rights. An additional Rs 557 crore in claims is under verification.  

 

Decline in sales  

 

The company, once a market leader, recorded sales of approximately 100,000 electric two-wheelers in FY23. However, regulatory hurdles contributed to a significant decline, with sales dropping to just 11,500 units in the last financial year.  

 

A report by The Economic Times quoted a senior industry executive as saying that Hero Electric had been in advanced discussions with a Saudi investor for a Rs 1,000 crore funding deal post-pandemic. However, negotiations collapsed due to regulatory complications.  

 

The electric two-wheeler industry faced setbacks during the pandemic, particularly with supply chain disruptions affecting localisation efforts. While four-wheeler manufacturers received a one-year extension to meet localisation norms, two-wheeler companies did not, leading to challenges for established players like Hero Electric, the news report said.

 

EV market outlook amid Hero Electric's struggles  

 

Despite Hero Electric’s financial difficulties, the Indian EV market is expected to expand significantly. The share of electric two-wheelers is projected to triple over the next five years, with one in five new two-wheelers expected to be electric. In 2024, EVs accounted for 6.1 per cent of total two-wheeler sales, surpassing one million units, as per data from the Federation of Automobile Dealers Associations (FADA) and the Vahan portal.  

 

Hero Electric, along with companies like Okinawa Autotech, faced government scrutiny for allegedly misusing subsidies under the FAME II (Faster Adoption and Manufacturing of Electric Vehicles) scheme. Authorities demanded a refund of Rs 469 crore from these firms for failing to meet localisation criteria while availing incentives. Companies that refused to repay were barred from future subsidy programmes.

 

Hero Electric disputed the government's recovery claim of Rs 133 crore (plus interest) and sought legal intervention for the release of Rs 556 crore in pending subsidies. In October 2024, the company proposed multiple solutions, including fines, mediation, and vehicle retesting, but negotiations did not yield a resolution.  

 

Ongoing fraud investigation  

 

The Serious Fraud Investigation Office (SFIO) has sealed Hero Electric’s premises and launched a probe into alleged subsidy misappropriation under FAME II. The company contested this investigation in the Delhi High Court, requesting intervention from the Ministry of Heavy Industry. The court ruled on December 20, 2024, that the probe would continue if no resolution is reached.