Hero FinCorp, a prominent player in India’s Non-Banking Financial Company (NBFC) sector, is all set to make a significant mark on the stock markets with its upcoming Initial Public Offering (IPO). As a subsidiary of Hero MotoCorp, the world’s largest manufacturer of two-wheelers, Hero FinCorp has leveraged its parent’s vast distribution network and brand equity to expand its operations. With plans to raise around ₹3,668 crore, this IPO offers a lucrative opportunity for investors looking to capitalize on India’s growing financial services market.
About Hero FinCorp
Founded in 1991 as Hero Honda Finlease Ltd, Hero FinCorp is a leading financial services provider that caters primarily to the retail and MSME (Micro, Small, and Medium Enterprises) sectors. Over the years, Hero FinCorp has diversified its offerings, including two-wheeler financing, personal loans, used car loans, and SME loans, among others. With over 11.80 million customers and a well-established reputation, the company has steadily grown its footprint across the country.
Hero FinCorp aims to increase its customer base to 15 million by 2025 and reach ₹10 billion in assets. The company’s diversified financial products, strong brand association with Hero MotoCorp, and growing market presence position it as an attractive investment opportunity.
Hero FinCorp IPO Details
- Total Issue Size: ₹3,668 crore
- Fresh Issue: ₹2,100 crore
- Offer for Sale: ₹1,568 crore
- Price Band: To be announced
- Listing: BSE and NSE
- Purpose of the Offer:
- Strengthening Tier-I capital base for future business requirements.
- Supporting business growth, including expanding the loan book, particularly in underserved markets.
- Investing in technology to improve customer service and operational efficiencies.
- Covering IPO expenses.
Financial Overview of Hero FinCorp
Hero FinCorp’s financial performance has seen robust growth over the years. Below is a summary of the company’s performance across various financial metrics.
| Particulars | FY 2024 (₹ in crores) | FY 2023 (₹ in crores) | FY 2022 (₹ in crores) |
| Total Income | 83,597.31 | 64,475.31 | 47,975.13 |
| Profit Before Tax | 9,605.47 | 7,352.41 | (2,540.28) |
| Net Profit | 6,370.48 | 4,799.47 | (1,918.98) |
| EPS (%) | 50.04 | 37.70 | (15.07) |
| EBITDA | 41,238.75 | 29,471.02 | 14,576.85 |
Key Financial Metrics:
- Total Revenue from Operations: From ₹6,003.77 crore in FY 2023 to ₹7,755.24 crore in FY 2024, showing a solid revenue growth.
- Profit After Tax (PAT): Increased from ₹457.33 crore in FY 2023 to ₹601.92 crore in FY 2024, demonstrating the company’s efficient management.
- Liabilities: Total liabilities grew from ₹34,842.01 crore in FY 2023 to ₹42,789.72 crore in FY 2024, reflecting the company’s aggressive expansion strategy.
Hero FinCorp’s Strengths
- Strong Brand Association: As a subsidiary of Hero MotoCorp, Hero FinCorp benefits significantly from its parent’s brand equity and strong customer base.
- Diversified Product Offering: Hero FinCorp’s portfolio includes two-wheeler loans, personal loans, used car loans, and SME loans, catering to various customer segments.
- Established Distribution Network: With over 11.80 million customers, Hero FinCorp has a vast distribution network of 2,000+ touchpoints across India.
- Technological Integration: The company has made significant strides in digital innovation, improving its non-cash collections rate from 76.00% in FY 2022 to 83.31% in FY 2024.
Risks to Consider
While Hero FinCorp’s IPO presents an enticing opportunity, investors should be aware of certain risks:
- Dependence on Hero MotoCorp: Hero FinCorp sources 99% of its two-wheeler loans through Hero MotoCorp’s dealerships. Any decline in demand for Hero two-wheelers could impact loan disbursement and profitability.
- Credit Risk: The company faces the risk of defaults, especially from new-to-credit borrowers, which can result in non-performing assets (NPAs).
- Regulatory Challenges: As an NBFC, Hero FinCorp is subject to stringent regulatory norms. Changes in policies or regulations could impact operations and financial health.
- Interest Rate Fluctuations: The company’s loan products, including both fixed and floating rates, may face challenges if there is an adverse change in interest rates.
Why Invest in Hero FinCorp IPO?
- Growing Financial Services Market: India’s financial services industry is expanding rapidly, with a projected CAGR of 13-14% in the NBFC sector from FY 2023 to FY 2025. Hero FinCorp is well-positioned to capture a larger market share.
- Solid Financial Performance: With impressive revenue growth and increasing profitability, Hero FinCorp has shown its ability to generate solid returns.
- Strong Backing from Hero MotoCorp: Hero FinCorp’s association with Hero MotoCorp provides significant brand strength and customer confidence, enhancing the company’s market position.
Future Outlook
Hero FinCorp’s long-term growth prospects are promising, driven by:
- Expansion Plans: The company is looking to broaden its geographical reach and diversify its product offerings, particularly in underserved markets.
- Increased Investment in Technology: Hero FinCorp is committed to enhancing its technological infrastructure, which will further improve customer experience and operational efficiency.
- Targeting ₹10 Billion in Assets by 2025: The company aims to expand its customer base to over 15 million and reach ₹10 billion in assets by FY 2025.
Conclusion
Hero FinCorp’s IPO presents an attractive opportunity for investors seeking exposure to the growing Indian financial services market. With strong revenue growth, robust financials, and the backing of Hero MotoCorp, Hero FinCorp is poised for continued success. However, potential investors should also weigh the risks involved, such as its dependency on Hero MotoCorp and the risks of credit defaults.
For those looking to invest in an established, growing NBFC with a strong brand and diverse product offerings, Hero FinCorp’s IPO is one to watch.
