Hero MotoCorp's September Quarter: Revenue Up 21%, EBITDA Up Only 8%, and a 13.4% Margin That Is Flat on June but Lower Than a Year Ago

Hero MotoCorp's standalone revenue from operations rose 21.1% (our arithmetic; the company prints 21%) to ₹14,687 crore in July-September 2026, and EBITDA rose 7.9% (our arithmetic; the company prints 8%) to ₹1,968 crore, on 10.5% more two-wheelers sold. The company says EBITDA margin "held steady at 13.4%": that is against the June quarter; a year earlier it was 15.0% (our arithmetic). Gross margin was about 505 bps lower than a year earlier (our arithmetic), and other expenses were ₹77 crore lower, which the CFO attributes largely to discretionary expense cuts. Consolidated profit after tax of ₹1,861 crore, up 41%, includes a one-time ₹397 crore gain from an associate. Results were approved on 28 October; the call was on 29 October; the transcript was filed on 3 November.

The idea in one sentence

A scale advantage is tested when costs rise: Hero sold more, earned more per unit and held its share, but material cost took almost every extra rupee of revenue, and the operating margin was flat on the June quarter, and 164 bps below last year (our arithmetic), because employee and other costs grew more slowly than revenue; other expenses were lower than a year earlier, which the CFO attributes largely to discretionary cuts.

The fact that breaks the assumption

The headline pairs a strong top line with a margin the company describes as steady. Revenue from operations was ₹14,687.43 crore against ₹12,126.37 crore a year earlier ([RS]), ₹2,561 crore more (our arithmetic). Material cost, by our definition, was ₹2,452 crore higher, 95.7% of the extra revenue (our arithmetic). EBITDA rose ₹144 crore (our arithmetic), about 5.6 paise on each extra rupee of revenue.

As a percentage of revenue (our arithmetic, [RS]; Q2 FY27, Q1 FY27, Q2 FY26):

• Material cost: 71.80%, 71.47%, 66.75%. Gross margin, 100 less this: 28.20%, 28.53%, 33.25%.
• Employee benefits expense: 5.04%, 5.38%, 5.76%.
• Other expenses: 9.76%, 9.87%, 12.46%.
• EBITDA margin: 13.40%, 13.28%, 15.04%.

So against the June quarter the company's account holds: gross margin down about 33 bps (the CFO says 30 bps), EBITDA margin up about 12 bps (the CFO says 10 bps); the offset came from employee benefits expense, down about 34 bps of revenue, and other expenses, down about 11 bps of revenue, although other expenses rose in rupees from ₹1,283.43 crore to ₹1,433.86 crore (our arithmetic). Against the year-earlier quarter, gross margin is down about 505 bps and EBITDA margin about 164 bps, with the gap between the two narrowed by other expenses falling about 270 bps of revenue and employee benefits expense about 72 bps. Other expenses were already 9.87% of revenue in the June quarter, so the low ratio is not new this quarter. The press release says: "Despite commodity headwinds, EBITDA margins held steady at 13.4%" ([PR]). The deck gives dispatches of 1,868 thousand against 1,691 thousand, up 10.5% ([IP], slide 6). Profit after tax rose 4.6% to ₹1,456.22 crore (our arithmetic; the company prints 5%).

One concrete thing, followed: the other expenses line

Other expenses were ₹1,433.86 crore against ₹1,510.87 crore a year earlier, down 5.1% (our arithmetic), in a quarter when revenue rose 21% ([RS]). Analyst Kapil Singh asked about this on the call and whether it was sustainable. Vivek Anand, Chief Financial Officer, answered that the fall was "largely because of the discretion expense cut we've taken during quarter 2" and that "there were budget cuts imposed to mitigate the impact of the material inflation" ([TR], 29 Oct call). The call does not say which items were cut.

At last year's ratio (12.46% of revenue), other expenses on this quarter's revenue would have been about ₹396 crore higher (our arithmetic). That is an illustration of the line's size, not an estimate of what was cut.

The mechanism: mix and price against material cost

What lifted revenue. Wholesale volume rose 10.5%: 18.68 lakh two-wheelers against 16.91 lakh ([RS]). Revenue per two-wheeler sold, including parts and accessories, rose about 9.6% to about ₹78,600 (our arithmetic). The CFO says revenue outpaced volume because of "premiumization led by an increasing share of ICE and EV scooters and premium variants contributing a 5% positive mix impact, equally supported by calibrated pricing" ([TR]). Scooters were 2.40 lakh units, up 47%, and 13% of volume against 10% a year earlier; parts, accessories and merchandise revenue was ₹1,941 crore, up 27% ([PR]). The filings do not split the revenue gain between mix, price and parts.

What took it back. The CFO lists "steel, aluminum, plastic, rubber and freight which was further amplified by currency depreciation", puts Q2 material inflation at "almost 1% quarter-on-quarter", and says: "our inflation is around 5.5%. We've taken half of it as a price increase." The CFO gives the period as quarter 1 and quarter 2 together. A further increase came in October, "almost around INR1,000 per unit" ([TR]). Our arithmetic from [RS]: material cost per two-wheeler sold rose about 17.9% year on year, nearly twice the rise in revenue per unit, which the inflation figures given (about 1% in Q2, 5.5% over Q1 and Q2) do not by themselves account for (our reading). Our reading, not the company's, is that mix explains much of it, since scooters and EVs carry a different cost per unit from a 100cc motorcycle; the call does not reconcile it.

The EV line. The CFO says "our VIDA business turned gross margin positive in the quarter", ahead of earlier guidance, and lists "PLI accruals amounting to INR63 crores" among the initiatives behind the improvement. As stated on the call, EV revenue was ₹1,000 crore and the EV EBITDA drag ₹168 crore, down from ₹232 crore in Q1. Our arithmetic: (1,968 + 168) / (14,687 - 1,000) = 15.6%, matching the CFO's "EBITDA margins were stable sequentially at 15.6%" for ICE (his "previous quarter" leaves the period unclear) and the CEO's "Margin drag is about 220 bps".

The corridor. The CFO says "We are committed to progressing towards our medium-term EBITDA range of 14% to 16%" and "we expect to achieve our target range in the next few quarters as commodity cycle stabilizes and raw material inflation returns to normalized levels." For Q3 he says "we expect input cost inflation pressure to persist" and "we expect margins in quarter 3 to remain stable" ([TR]). At this quarter's revenue, 60 bps from 13.4% to the floor is about ₹88 crore (our arithmetic).

Where the moat shows, and where the filings stop

The focus moat is distribution and brand scale as a cost advantage. The documents offer: a 100cc motorcycle market share of 85.0% in H1 FY27, up 3.9 percentage points from 81.1% (our arithmetic), on SIAM dispatches ([IP], slide 5); ICE Vahan share gains "in each of the three months of the quarter" ([PR]); about 8,500 points of sale, with VIDA sold through around 700, which Harshavardhan Chitale, Chief Executive Officer, calls "one of our biggest strengths. The large go-to-market in the entire nook and corner of the country" ([TR]); and parts revenue of ₹3,630 crore in H1, up 28% ([IP], slides 5 and 12), a business he calls "a big contributor of our profitability".

Our reading: the quarter fits a volume and distribution advantage (share held or gained, revenue per unit up, discretionary spend trimmed). It does not show a cost advantage over rivals, because no peer figure is in these documents, and pass-through is partial: by the CFO's account about half the inflation went into price.

Reading the consolidated profit: a ₹397 crore gain

Consolidated profit after tax was ₹1,860.55 crore against ₹1,320.98 crore, up 40.8% (our arithmetic; the company prints 41%) ([RS], [PR]). Note 11 says the share in net profit of associates "includes a gain of Rs. 397 crores recognised on account of change in the Company's share of investment in associates consequent to its raising of capital through Qualified Institutional Placement and Private Placement". That line was a profit of ₹417.38 crore against losses of ₹98.03 crore a year earlier and ₹43.89 crore in Q1; without the gain it would be ₹20.38 crore (our arithmetic). Profit before tax without the gain would be ₹1,964.39 crore against ₹1,776.88 crore, up 10.6% (our arithmetic; assumes the whole gain sits in that line, as note 11 says). Separately, note 7 to the standalone results shows an investment of ₹2,000.33 crore in Ather Energy Limited, an associate, in the quarter (including ₹240 crore through share warrants); note 11 does not name the associate involved. The filings do not give the tax on the gain, so we do not restate profit after tax. Our reading: it is an accounting gain on a change in the group's share of an associate, not cash from operations; the CFO calls it a "onetime gain" ([TR]). The quarter has no exceptional item; the ₹119 crore labour-code provision in note 10 belongs to FY26.

Where this breaks

1. The margin hold rests on costs, not gross margin. Against last year, other expenses fell about 270 bps of revenue and employee benefits expense about 72 bps while gross margin fell about 505 bps (our arithmetic); against June, employee and other costs fell about 45 bps of revenue together against a 33 bps gross-margin dip. The CFO attributes the other-expenses fall largely to budget cuts against material inflation. The CEO says in the same call: "we are not going to compromise or cut down on investments needed for driving growth and market share expansion." The two need not conflict (discretionary spend against growth investment), but the call does not say what was cut or whether it continues; other expenses were already 9.87% of revenue in the June quarter (our arithmetic).
2. Dependence on mix and price. Half the inflation went into price, and revenue carried a 5% mix benefit; yet material cost per unit rose faster than revenue per unit (our arithmetic). Our reading: further price rises depend on demand; the CEO says demand fundamentals "continue to hold up", a view on the call, not a filing.
3. Export shocks. The CEO says exports were hit by an earthquake in a Latin American country and a demand slowdown in Bangladesh. In the Q&A he puts Colombia at "close to 25% of our exports business", says Hero was "not able to compensate that with rest of the 50%", and expects "double-digit growth back in Q3 and Q4". The deck shows global dispatches of 85 thousand against 112 thousand, down about 24% (our arithmetic; read from the chart on slide 13), and market share of 5.2% against 8.6%, while the company says retail grew 19%. The board approved up to ₹300 crore more investment, over two years, in HMCL Netherlands B.V. for its Colombia and Brazil subsidiaries ([BI]).
4. EV capex, unfinished. Full-year capex guidance is ₹1,500 crore with "close to INR600 crores" deployed in H1; VIDA capacity was 30,000 a month in September, with 45,000 targeted for Q4 and over 80,000 by Q2 of next year ([TR], as stated on the call). VIDA still lost ₹168 crore at EBITDA level (call), and its Q2 Vahan share was 11.1% against 11.5% a year earlier, though H1 was 11.0% against 9.3% ([IP], slide 11). Note 9 of both sets of results says the company "is currently unable to reliably estimate" the cost of the end-of-life vehicle and battery waste rules.
5. Management numbers that disagree. The CEO and the CFO give different VIDA retail growth figures on the same call, and the press release and deck give a third (76%, from 67 thousand against 38 thousand, [IP] slide 11). We use none of the spoken ones. The CFO's "INR70 crores" improvement does not match ₹232 crore less ₹168 crore (₹64 crore, our arithmetic).
6. Strongest case against our thesis. The company's argument is that this is what scale buys: 13.4% held against inflation of about 5.5%, half recovered in price, ICE margin of 15.6% inside the corridor, a shrinking VIDA drag and share gains every month. We cannot refute it from one quarter without peer data. The reports are limited reviews, not audits; the conclusion is not modified on either statement, but a review "does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit", and for five subsidiaries and two associates it rests wholly or partly on other auditors, again not modified.

Why it costs the reader something

A reader who takes 13.4% as proof that a big network absorbs commodity inflation is counting spending cuts that the call does not detail as structural. A reader who takes the 41% rise in consolidated profit as an earnings jump is counting a ₹397 crore accounting gain; before it, profit before tax rose about 10.6% (our arithmetic). The filings support something narrower: a leader that held share and grew volume and revenue per unit, with an operating margin flat on the June quarter and 164 bps below last year's. Earlier on a similar squeeze: Escorts Kubota, Q2. The wider day: Daily Filing Digest, 3 Nov 2026.

MoatSCORE: 5.14 (AMBER+, first-pass), read live from the Moat Screener on 4 Nov 2026

What to watch

1. Gross margin against 28.20% and other expenses against 9.76% of revenue (our arithmetic), and whether the company says what was cut.
2. EBITDA margin against 13.4%, the CFO's "remain stable" for Q3, and the 14% floor.
3. Export dispatches against 85 thousand, and the stated expectation of double-digit export growth in Q3 and Q4.
4. The VIDA EBITDA drag against ₹168 crore, and VIDA VX2 retail availability in six European markets from December 2026 ([EP]).

The concrete thing, again

Other expenses: ₹1,433.86 crore against ₹1,510.87 crore, down 5.1% while revenue rose 21%, in a quarter when gross margin was about 505 bps lower than a year earlier. The company says margin "held"; it held against the June quarter, not against last year, and the line that narrows the gap to last year is a budget the CFO says was cut. Until the filings say what was cut, and material cost per unit stops rising faster than revenue per unit, the quarter shows that Hero's scale gave it room to hold the line against June, not a cost advantage over rivals; no peer figures are in these documents.

Sources

• [RS] Hero MotoCorp, results for the quarter and half year ended 30 Sep 2026, notes and review reports (NSE)
• [PR] Hero MotoCorp, press release on Q2 and H1 FY27 results (NSE)
• [IP] Hero MotoCorp, Q2 and H1 FY26-27 financial results presentation (NSE)
• [TR] Hero MotoCorp, transcript of the Q2 FY27 earnings call of 29 Oct 2026, filed 3 Nov 2026 (NSE)
• [BI] Hero MotoCorp, board outcome and Annexure-2 on investment in HMCL Netherlands B.V. (NSE)
• [EP] Hero MotoCorp, EICMA 2026 press release, 3 Nov 2026 (NSE)
• Earlier Moat & Margin pieces: Escorts Kubota, Q2 margin squeeze; Marico, Q2 gross margin, volume and ad spend

Educational research, not investment advice. Every figure above is drawn from Hero MotoCorp's own filings of 28 October and 3 November 2026, read from the primary documents on 4 November 2026; derived figures are our arithmetic, labelled as such; figures given only on the 29 October call are marked as stated on the call. MoatSCORE: 5.14 (AMBER+, first-pass), read live from the Moat Screener on 4 Nov 2026. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.