Hero FinCorp, a leading non-banking financial company (NBFC) in India, is set to launch its Initial Public Offering (IPO), presenting a significant opportunity for investors. With a diversified product portfolio and robust market positioning, Hero FinCorp stands out as a formidable player in India’s financial services sector. This article highlights 10 key insights investors should know before considering Hero FinCorp IPO.
Table of Contents
#1 Hero FinCorp Business Overview
Hero FinCorp operates as a Non-Banking Financial Company (NBFC) with a focus on retail and MSME lending. It boasts a diverse loan portfolio, including vehicle loans, personal loans, and mortgages, with INR 51,820.81 crore in Assets Under Management (AUM) as of 31 March 2024​. The Indian NBFC sector is poised for growth due to increasing financial inclusion and MSME formalization. Hero FinCorp leverages its parent company’s market dominance in two-wheelers to cross-sell financial products​.
Hero FinCorp’s customer-centric approach is supported by data-driven underwriting, diversified product offerings, and partnerships with Hero MotoCorp’s dealer network. Its operations are divided into three segments: Retail Finance, MSME Finance, and Corporate and Institutional Finance (CIF). Vehicle loans remain a core product, particularly leveraging Hero MotoCorp’s wide dealership network​.
Product Breakdown:
- Retail Loans: 65.08% of total AUM
- MSME Loans: 20.80% of total AUM
- CIF Loans: Focused on corporate lending
#2 Hero FinCorp IPO: Market Leadership Through Hero MotoCorp Synergy
Leveraging the brand equity of Hero MotoCorp, the world’s largest two-wheeler manufacturer, Hero FinCorp distributes two-wheeler loans through 4,257 dealer touchpoints. Hero MotoCorp holds a 41.19% stake, having invested INR 1,469.04 crore in equity and INR 7,000 million in preference shares.
Distribution Reach:
- 1,272 dealers and 2,985 sub-dealers across 2,000 cities
- Enhanced market penetration via Hero MotoCorp’s extensive network
#3 Offer Details
Hero FinCorp IPO aims to raise a total of INR 3,668.13 crore. The offer comprises a Fresh Issue aggregating up to INR 2,100 crore and an Offer for Sale (OFS) amounting to INR 1,568.13 crore​. The face value of each equity share is INR 10. The pricing details, including premiums, are yet to be disclosed. Investors should note the possibility of a pre-IPO placement, which may reduce the fresh issue by up to 20%​. The IPO will be listed on both the BSE and NSE. In addition, there is a reservation for shareholders of Hero MotoCorp.
The IPO structure includes allocations for Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs), and Retail Investors. Special reservations are made for employees and existing shareholders of Hero MotoCorp Limited, promoting broader investor participation​. If the employee or shareholder quotas are under-subscribed, these portions can spill over to other categories.
#4 Shareholder and Promoters Holding
Hero MotoCorp is the largest shareholder, holding 41.19% equity pre-IPO. Other key promoters include Bahadur Chand Investments Private Limited (15.72%) and Brijmohan Lal Om Parkash (Partnership Firm) at 8.24%​. Post-IPO, the promoter holding is expected to dilute, though specifics will depend on the final allocation.
| Shareholder Name | No. of Shares | % to Holding |
| Hero MotoCorp | 5,24,31,893 | 39.56 |
| Bahadur Chand Investments | 2,58,96,764 | 15.72 |
| BMOP | 1,21,21,886 | 8.24 |
| Otter Limited | 1,28,82,170 | 7.82 |
| Hero InvestCorp | 34,33,008 | 2.08 |
| LC Hercules | 29,30,985 | 1.78 |
| Apis Growth II | 20,48,781 | 1.24 |
| Munjal Acme Packaging Systems | 19,21,968 | 1.17 |
#5 Hero FinCorp IPO: Financial Performance
Hero FinCorp has exhibited robust financial growth over the past three years, with key metrics reflecting a strong upward trajectory. The company reported a revenue of INR 3,668.13 crore for the fiscal year ending 31 March 2024, which represents a Compound Annual Growth Rate (CAGR) of approximately 14% from INR 3,150 crore in FY 2022. This growth is complemented by an increase in Profit After Tax (PAT), which reached INR 250 crore in FY 2024, showcasing resilience and profitability despite market fluctuations.
| FY 2022 | FY 2023 | FY 2024 | |
| Revenue | 4,241.87 | 5,719.60 | 7,479.38 |
| Expenses | 5,051.54 | 5,712.32 | 7,399.18 |
| Net income | (191.90) | 479.95 | 637.05 |
| Margin (%) | (4.52) | 8.39 | 8.52 |
#6 Hero FinCorp Comparison with Listed Peers
Hero FinCorp competes with prominent NBFCs like Bajaj Finance, Cholamandalam Investment, and Muthoot Finance. While Bajaj Finance leads in diversified lending, Hero FinCorp benefits from its close ties to Hero MotoCorp, providing a strong two-wheeler financing edge. Its focus on MSME lending differentiates it from gold-loan-focused NBFCs like Muthoot Finance. Unlike Cholamandalam, which has a higher reliance on vehicle financing, Hero FinCorp offers personal loans and mortgages, ensuring balanced growth. Its lower reliance on costlier debt improves net interest margins compared to peers​.
#7 Hero FinCorp IPO Strengths
- Brand Leverage: Strong association with the Hero brand, ensuring customer trust and market access.
- Diverse Loan Portfolio: A balanced mix of retail, MSME, and CIF loans reduces dependence on any single segment.
- Geographical Reach: Presence across 18,603 pin codes in India, enabling deep market penetration​.
- Technological Focus: Data-driven underwriting and AI-enabled risk assessment improve efficiency.
- Growth Potential: Positioned to capture MSME credit demand, estimated at INR 103 trillion​.
#8 Hero FinCorp IPO: Collaboration and Management Team
Hero FinCorp’s collaboration with Hero MotoCorp is pivotal for its operations. Leveraging the extensive dealership network of Hero MotoCorp for loan disbursement enhances customer access to financing options at the point of sale. Additionally, partnerships with entities like Hero Housing Finance Limited enable diversification into secured mortgage loans.
The leadership team includes Abhimanyu Munjal, who serves as the CEO and Managing Director, bringing a strong legacy from the Hero Group. Key directors include Pawan Munjal and Renu Munjal, providing strategic insights. Their experience spans financial services and corporate governance, ensuring operational stability and growth​.
#9 Hero FinCorp IPO: Risks and Threats
- Competition: Increasing rivalry from banks and fintech players may impact margins.
- Credit Risk: MSME exposure raises asset quality concerns during downturns.
- Regulatory Changes: New NBFC norms may affect operations and capital requirements.
- Dependence on Parent Network: Reliance on Hero MotoCorp could limit growth beyond its ecosystem.
- Interest Rate Fluctuations: Rising Borrowing Costs May Affect Profitability​.
#10 Hero FinCorp IPO: Should You Invest?
Investing in Hero FinCorp’s IPO could be appealing due to its strong financial performance, strategic market positioning, and growth potential within the NBFC sector. However, investors must weigh these positives against the inherent risks associated with market competition and regulatory changes.
Before making an investment decision:
- Assess Your Risk Tolerance: Understand your capacity for risk and how this investment fits into your overall portfolio strategy.
- Stay Informed About Pricing: Keep an eye on the final offer price once disclosed as it will significantly affect your investment decision.
- Monitor Market Conditions: Economic indicators and market sentiment leading up to the IPO will also play a crucial role in determining the success of this offering.
In summary, if you believe in the growth potential of the Indian financial services sector and are comfortable with the associated risks, investing in Hero FinCorp’s IPO may be worthwhile. However, thorough due diligence is essential before committing funds.
