Hero Group takes a leap of faith with its deep tech ambitions

India’s largest two wheeler manufacturer is looking at an uncanny diversification into high end technology companies. Its intentions may be good but deep tech has been a hard business to scale in India

Vandana, 20 Jul 2020

Hero Electronix is betting on two major areas—connected devices and semiconductor engineering

With an intent to invest $200 million, it acquired three companies that gave it different deep tech capabilities

It also built a consumer IoT venture called Qubo from scratch; it plans to become a platform for connected devices

It doesn’t want to subsume these businesses into one large company; instead it wants to promote synergies between them

Traditionally, the HeroMotoCorp is known for one thing—two-wheelers. Since Brijmohan Lall Munjal founded the company in 1984, it has grown into the overwhelming market leader in the Indian motorcycle space, becoming an iconic national brand in the process. Its turnover turnover Hero Motocorp Hero Motocorp FY20 results Read more for the year ended March 2020—Rs 28,836 crore ($3.8 billion)—can largely be attributed to sticking to its knitting.

In 2016, though, Ujjwal Munjal, the grandson of Brijmohan Munjal, broke with tradition. He added a new feather to the company’s cap, and an unlikely one that—Hero Electronix, a deep tech deep tech Deep tech startups Deep tech startups are those that work on new-age technologies such as artificial intelligence, Internet of Things, machine learning, blockchain, and more business nestled within the Hero Group.

The genesis of Hero Electronix is strange not just because it comes from the Hero Group, but because the deep tech space in India doesn’t really see much investor interest. According to consultancy firm Bain and Company, 80% of the venture capital investments made in India in 2019 went to just four sectors went to just four sectors Bain and company Bain's India venture capital report 2020 Read more —consumer tech, software and software-as-a-service, fintech, and business-to-business commerce and tech.

Siddharth Pai, founder and managing partner at Siana Capital Management, attributes this to deep tech businesses being “long gestation” investments, not given to the hyper-growth prospects of more mainstream sectors. Bengaluru-based Siana invests in “ideas driven by science and tech” and has a Deep Science India Fund, but is very much an outlier.

Oakter, one of the pioneers of India’s deep tech space, bears testament to this lack of interest. Its co-founder and CEO Shishir Gupta candidly admits that investor interest is hard to come by. This, even as the company recently struck up a partnership with the Brigade Group, one of India’s largest real estate developers, to incorporate smart home solutions in the latter’s upcoming projects. Oakter’s last fundraise was in 2016.

Backed by the Hero Group’s deep pockets, though, Hero Electronix has built up a portfolio of four deep tech companies—three by acquiring majority control, and one that it built in-house.

The first of these was MyBox Technologies Pvt Ltd, a Delhi-based set-top-box company just as Hero Electronix was getting off the ground in 2016.

AUTHOR

Vandana

Vandana is based in Delhi. She covers vertically focussed startups in consumer internet space and also writes on travel tech and smartphones for The Ken. She has spent 13 years in journalism covering a wide range of subjects- equity markets, mutual funds to education and skilling, working at organisations such as Business Standard, CNBC TV18 and The Week in the past.

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