Hero Electric, India’s first electric scooter manufacturer, has been admitted to insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) due to a default of over Rs 1.85 crore. The company’s corporate insolvency resolution process has advanced, with the total admitted claims of creditors amounting to over Rs 301.23 crore. The Resolution Professional (RP) has invited expression of interest (EOI) from potential bidders, which will close on March 14, 2025, and the final list of bidders will be released on April 8.
The Committee of Creditors (CoC), led by Bank of Baroda with 66.92% voting rights, will play a crucial role in determining whether Hero Electric is liquidated or successfully resuscitated through resolution. IDFC First Bank, Kotak Mahindra Bank, and South Indian Bank are also significant stakeholders in the CoC.
Hero Electric’s struggles began with regulatory challenges, including the ceasing of sales of electric two-wheelers in FY23, which dropped to a mere 11,500 units in the last fiscal year. The company’s sales were impacted by the pandemic, and despite efforts to raise funds, including talks with an investor in Saudi Arabia, the company was unable to stay afloat.
Hero Electric was also under the scanner for wrongfully claiming subsidies under the FAME II scheme and was ordered to return over Rs 469 crore to the government. The company had contested the recovery claims and sought legal recourse, but the settlement talks failed, leading to the sealing of its premises and an investigation by the Serious Fraud Investigation Officer (SFIO). The company is now contesting the SFIO probe in the Delhi High Court.
The developments come as the electric vehicle industry is expected to grow, with one in five two-wheelers sold in India expected to be electric in the next five years. Despite the challenges faced by Hero Electric, the company remains a significant player in the industry, having sold over 100,000 electric two-wheelers in FY23.