Profit with purpose can be a viable pursuit: Hero Future Energies' Rahul Munjal

Munjal, 48, who started Hero Future Energies in 2012, foraying into wind turbines-based power generation with a small 20 MW project, has since expanded into solar, hybrid, and now green hydrogen

By Harichandan Arakali Forbes India Staff

Published: Sep 9, 2024 11:12:36 AM IST

Updated: Sep 9, 2024 11:50:05 AM IST

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Rahul Munjal, chairman and managing director, Hero Future Energies. Image: Madhu Kapparath

Even as this issue of Forbes India hits the stands, Rahul Munjal will be a tad closer to the inauguration of a small green hydrogen plant at an aluminium smelting factory, slated to go live before the year is out. Munjal, chairman and managing director of Hero Future Energies (HFE), declined to add specifics prior to the opening of the plant, but it’s the latest example of how the renewable energy business he’s built is expanding and pursuing the founder’s decarbonisation agenda.

Commercial and industrial projects, C&I as the sector is called, currently a nascent operation at HFE, represent a big opportunity for the company to expand into, Munjal tells Forbes India. This involves setting up renewable energy operations for large factories in sectors such as cement manufacturing or iron and steel. And green hydrogen is widely seen as a promising source of energy for such factories.

The wind solar hybrid project at Manvi, Karnataka, run by HFE

The one that HFE is opening shortly is a pilot plant, at a factory in South India, Munjal says. It will demonstrate that the technology works. The plan is to use industrial-grade electrolysers on site to generate hydrogen, which is then blended with PNG (piped natural gas) and LNG (liquified natural gas) as fuel to produce heat for a smelter, he says. “That’s how you will end up decarbonising the process to some extent. Obviously, it still uses PNG and LNG, but it’s at least a start in the right direction,” he adds.

Munjal, 48, who started HFE in 2012, foraying into wind turbines-based power generation with a small 20 MW project, has since expanded into solar, hybrid and now green hydrogen. Overall, the Delhi-based company has about 1.9 GW of capacity today. Most of it is in India, where HFE operates wind, solar and hybrid facilities in states, including Rajasthan, Maharashtra, Madhya Pradesh, Karnataka, Tamil Nadu, Andhra Pradesh and Telangana.

The company is also actively pursuing overseas opportunities, including in Vietnam, Britain and Ukraine. HFE also has contracts in Bangladesh, where the company’s operations will step up once the current political turmoil there is resolved. Over the next three years or so, Munjal is working to get to nearly 5 GW overall capacity.

In the C&I sector, “driven by the need for businesses to reduce operational costs and meet sustainability goals, the market has seen a surge in renewable energy adoption”, Srivatsan Iyer, HFE’s US-based global CEO, told PowerLine, an industry magazine, in July. Decreasing cost of solar panels and advances in battery storage coupled with government incentives and greater awareness around climate change among corporate customers have all contributed to the acceleration in adoption of renewables, he added.

On the tech front, Iyer expects HFE to invest more in areas, including long-duration energy storage—storage systems that can hold and supply power for more than 10 hours, which helps to buttress intermittent renewables, making the grid more resilient, and, therefore, reducing dependence on fossil fuel-based power. Green hydrogen is another area of investment for the company.

HFE’s revenues in FY23 were Rs 1,539 crore versus Rs 1,430 for the previous year. Losses for the year ended March 31, 2023, were Rs 325 crore versus Rs 576 crore for FY22, according to a rating upgrade note by Crisil. In the March note, Crisil, a credit rating provider, upgraded its rating of HFE from A/Stable to A+/Stable, citing the strength and continued backing of the Hero Group as an important reason. Crisil also noted that there was a 3 percent improvement in the performance of HFE’s renewables portfolio in FY23 versus FY22.

The Hero Group, founded by the Munjal family, is one of the world’s biggest makers of motorcycles and scooters. The group’s flagship is the $11.9 billion Hero MotoCorp. HFE, part of the group, will likely only grow in significance, playing its role in India’s transition to clean energy over the next two to three decades.

Also read: How the Rs 1,000-crore Paramount Cables is rewiring its strategy

HFE’s major shareholders today are the Munjal family, US-based global investment company Kohlberg Kravis Roberts & Co (KKR) and International Finance Corporation. It has raised $725 million in equity funding so far, including a $450 million Series D round in September 2022, with participation from KKR and Hero Group, according to Tracxn, a provider of private markets intelligence.

Mint reported in February that the company is preparing for an initial public offering (IPO), and also seeking $200 million pre-IPO investments. Munjal declined to comment.

HFE is beginning to make a mark in decarbonising grids, he says. “We’ve done our bit as a renewables company to be able to say decarbonising the grid is here and it can be done.” The next big opportunity is to decarbonise the C&I sector. “And after that, probably focus on decarbonising the transportation sector,” he says.

That he comes from a respected business family “brings huge advantages”, he says. For example, the family’s credibility on the back of what they have achieved helps to explain plans and convince important stakeholders, he says. The flip side is also that “it’s a great responsibility” to do the rightthing.

“I’ve always been passionate about profit for purpose. This is a value that we got from our grandfather Brijmohan Munjal,” he says. The late Brijmohan Lall Munjal was born in 1923 at Kamalia, in Punjab of present-day Pakistan. At 20, he came to Amritsar with his three brothers. After several years working at the Indian Ordnance Factory, he and his brothers started a bicycle parts business in 1954, which became Hero Cycles in 1956. Over the next two decades, the company became the biggest bicycle maker in India and, by 1986, in the world.

Munjal started a scooters and moped business in 1984, and then struck a deal with Japan’s Honda to start Hero Honda and make motorcycles in Haryana. That company is today Hero MotoCorp, which by 2023 had sold more than 200 million two wheelers. Brijmohan Munjal died in 2015.

Rahul Munjal’s father Raman Kant Munjal, who had helped Brijmohan build Hero Honda died suddenly in 1991. Pawan Munjal, Rahul’s uncle, is the current chairman and CEO of Hero MotoCorp. “Brijmohan was extremely passionate about giving back to the world,” Rahul Munjal says. “I realised you could also do business where you could do profit for purpose or you could be in impact business… being third generation, it’s almost a moral duty for us to do something where we can give back to the community. At the same time, it should definitely be a business.”