Hero FinCorp, the financial services arm of the Hero Group, is preparing for its much-anticipated IPO. With SEBI’s approval secured on 22 May 2025, the company is now set to raise INR 3,408 crore, comprising a revised fresh issue of INR 1,840 crore and an offer for sale (OFS) of INR 1,568 crore. Hero FinCorp’s IPO valuation is pegged at around INR 1,400 per share, anchored by a recent pre-IPO placement round.
This valuation reflects the price at which the company raised INR 260 crore on 16 June 2025 by issuing 18.57 lakh shares to 13 marquee investors, including Shahi Exports (INR 69 crore) and RVG Jatropha Plantation (INR 50 crore). This pricing now serves as a market benchmark as Hero FinCorp moves into the public domain.
In addition to being a litmus test of investor appetite in the NBFC space, Hero FinCorp IPO valuation will also set a benchmark in India’s post-pandemic lending ecosystem. With a diversified lending model and ambitions for scale, it arrives at a time when public markets are cautious yet optimistic.
As investors weigh their options, one question dominates: Is Hero FinCorp IPO valuation fair or it is overpriced at INR 1,400 per share?
This analysis presents a multi-layered deep dive into Hero FinCorp’s valuation using:
- Adjusted and forward-looking earnings models
- EV/EBITDA, P/B, P/S, RoE-growth-risk and SOTP valuation frameworks
- Risk stress tests and scenario analysis
- Segment-wise business economics
- Q4FY25 performance, bad loan data, and asset quality trends
1. FY25 Results: What Went Wrong?
Hero FinCorp’s FY25 performance shows a troubling disconnect between revenue growth and bottom-line results:
On the surface, Hero FinCorp’s FY25 performance appeared weak:
- Revenue grew ~18% YoY to INR 9,833 crore
- PAT (before adjustment) dropped sharply to INR 110 crore, from INR 637 crore in FY24
- EPS declined from INR 50.0 in FY24 to INR 8.6 in FY25
- GNPA rose to 5.36% due to higher write-offs and credit stress
- Loan write-offs surged 80% to INR 2,180.9 crore
- Of these, INR 1,875 crore worth of loans were sold for just INR 49.85 crore — a sharp haircut
- Q4FY25 PAT declined 69.7% YoY to INR 41 crore
- Unsecured personal loans now form ~31% of the book, adding asset quality risk
🔍 Key Culprits:
- Sharp increase in credit provisioning due to fresh slippages
- Higher cost of funds (due to interest rate tightening)
- Low recovery on written-off assets
- Growing unsecured loan share (e.g., personal loans = ~31% of book)
However, as disclosed in Note 11 of the consolidated results, there were material adjustments amounting to INR 2,884.36 crore that must be added to the net worth.
- Adjusted FY25 PAT: INR 110 crore + INR 333 crore = INR 443 crore
- Adjusted EPS (based on ~12.98 crore shares): ~INR 34.12
- Adjusted Net Worth: INR 5,753.15 crore + INR 2,884.36 crore = INR 8,637.51 crore
These adjustments significantly change the valuation picture.
Hero FinCorp IPO Valuation: Business Model Deep Dive
Hero FinCorp operates across multiple high-growth lending segments, including two-wheeler financing, personal loans, MSME loans, and housing finance through its subsidiary HHFL. It boasts a diversified loan book with a mix of secured and unsecured lending, reaching 11.8 million customers and INR 51,821 crore in AUM as of FY24.
Outlook for the Next 5 Years (FY26–FY30):
Despite FY25 profitability challenges, Hero FinCorp is well-positioned for long-term growth, driven by structural factors and internal capabilities:
1. Tailwinds from “Aspiring India” and MSME Segments
- 72.2% of Hero FinCorp’s retail customer base in FY24 came from households earning INR 0.2–1.0 million annually — a fast-expanding segment expected to grow from 103 million to 181 million households by FY30 (CRISIL).
- MSMEs (20.8% of AUM) are benefiting from formalisation, Udyam registration, and digital adoption, making credit assessment easier.
- Government projects MSME contribution to GDP will grow from 29.2% to 40–50% by FY30, offering Hero FinCorp a larger credit addressable market.
2. Diversified Lending + Cross-Selling Engine
- Product-per-customer (PPC) rose from 3.15 (FY23) to 4.25 (FY24), showcasing Hero FinCorp’s strong cross-sell potential.
- The average number of lending products per customer also grew steadily (FY24: 1.45 vs. FY22: 1.12).
- With deeper digital integration and a pan-India footprint covering 18,603 pin codes, the company is expected to drive growth beyond metros and expand wallet share.
3. Digital and Data-Driven Edge
- AI/ML-led underwriting, eKYC, e-signing, and 83% digital collections enhance efficiency.
- With 6.5 million mobile app downloads, real-time analytics from 102 micro-market level data points, and 30+ data partnerships, Hero FinCorp is expected to scale without proportionate cost increases.
4. Credit Cost Stabilisation Ahead
- FY25 saw a spike in provisioning and write-offs due to unsecured loan stress.
- However, long-term indicators (like PCR rising to 51.41% in FY24) and centralised AI-based risk monitoring suggest improved resilience ahead.
- A reversal in GNPA trends is possible by FY27, assuming current tech-led recovery strategies work.
5. Capital Adequacy and Growth Readiness
- With a CAR of 16.28% in FY24 and fresh equity from the IPO, the balance sheet is likely to support growth without raising near-term leverage risks.
- Management plans to use IPO proceeds to improve Tier-I capital, not for immediate loan book expansion — indicating a conservative but scalable foundation.
📈 Projections (Indicative, FY26–FY30 based on current CAGR trends):
- AUM may grow from INR 51,821 crore (FY24) to ~INR 1.0–1.1 lakh crore by FY30, assuming a 12–14% CAGR.
- Retail loans will likely remain the main driver (~65% of book), especially personal and mortgage loans.
- MSME finance could accelerate faster, possibly contributing 25–28% of AUM by FY30, up from 20.8%, especially in secured formats (LAP, construction finance).
- Net Interest Margins expected to hold around 9–9.5% with operating leverage gains from tech.
Hero Fincorp IPO Structure and Use of Proceeds
- Fresh Issue: INR 2,100 crore — to strengthen capital base for future lending, boost Tier-I capital, and meet regulatory adequacy norms.
- Offer for Sale: INR 1,568 crore — a partial exit for private equity investors including Apis Growth II, AHVF II Holdings, Otter Ltd, and others who participated in pre-IPO rounds.
Notably, the IPO proceeds will not be used for loan book expansion directly or inorganic acquisition. This suggests a defensive capital replenishment approach, aimed at reducing leverage pressure and supporting long-term growth.
Financial Overview: Growth Meets Margin Pressure
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 6,401.60 | 8,290.90 | 9,832.73 |
| Net Profit | 479.95 | 637.05 | 109.95 |
| Net Margin (%) | 7.50% | 7.68% | 1.12% |
| EPS (INR) | 37.67 | 49.94 | 8.62 |
| Debt/Equity Ratio | 4.09 | 4.66 | 5.80 |
| ROE (%) | ~11% | ~12% | ~1.9% |
| RoA (%) | ~1.9% | ~2.4% | ~2.6% |
The trend reveals that FY25 saw a sharp decline in net profit and margins after a blockbuster FY24. This volatility in earnings warrants deeper scrutiny. Debt levels remain high, leading to elevated interest costs and diluted shareholder returns.
Hero Fincorp IPO Valuation Analysis: Does INR 1,400 Make Sense?
Market Capitalization at INR 1,400/share:
- ~12.73 crore shares × 1,400 = INR 17,822 crore
Valuation Multiples (Post Adjustment):
- P/E (Adjusted FY25 EPS INR 34.12): ~41.0X
- P/B (Adjusted Net Worth INR 8,637.51 Cr): ~2.06x
- EV/EBITDA: Revised figure becomes far more aligned with sector average
These numbers place Hero FinCorp IPO valuation closer to sector norms. For comparison:
| Company | P/E | P/B | ROE | GNPA |
|---|---|---|---|---|
| Hero FinCorp (adj.) | 41.0 | 2.06 | ~5.1%* | 5.36% |
| Bajaj Finance | 33.6 | 7.2 | 19.2% | 0.96% |
| Chola Finance | 30.6 | 5.0 | 19.7% | 3.97% |
| Shriram Finance | 14.8 | 2.97 | 15.8% | 4.55% |
*Note: Adjusted ROE calculated with post-adjustment PAT
Valuation Sensitivity Table:
| Share Price (INR) | P/E at EPS INR 8.62 | P/E at EPS INR 49.94 | P/E at Adj. EPS INR 34.12 |
| 1,000 | 116x | 20x | 29.3x |
| 1,200 | 139x | 24x | 35.2x |
| 1,400 | 162x | 28x | 41.0x |
SOTP (Sum-of-the-Parts) Valuation:
| Segment | Multiple | Value (INR Cr) |
| Auto Lending | 2.5x | 5,500 |
| MSME & Personal (Unsecured) | 1.2x | 2,160 |
| Housing (HHFL) | 3.0x | 2,400 |
| Others (LAP, Pre-owned, etc.) | 1.5x | 1,800 |
| Total Implied Valuation | 11,860 |
This gives an SOTP-based per share value of ~INR 900–950, though that does not reflect adjusted earnings.
🧮Hero FinCorp IPO Fair Value Estimate: What Should Hero FinCorp Be Worth?
We determine a justified fair price by triangulating three key valuation methods:
1. Peer-Based P/E Valuation
Using adjusted FY25 EPS of INR 34.12, the implied valuation across sector-relevant P/E bands becomes significantly more optimistic:
| P/E Band | EPS (INR 34.12) | Implied Fair Value (INR ) |
|---|---|---|
| 15x | 34.12 × 15 | 511.80 |
| 17x | 34.12 × 17 | 579 |
| 20x | 34.12 × 20 | 682.40 |
🧾 Note: The higher adjusted earnings drastically raise the implied fair value using this method. However, market sentiment may not fully price in these adjustments initially.
2. Price-to-Book Value (P/BV) Valuation
Using adjusted net worth of INR 8,637.51 crore and ~12.98 crore shares, the adjusted Book Value per Share becomes:
- P/BV: 2.31
- BVPS = INR 665.3
- At peer P/B multiples:
| P/B Multiple | Implied Fair Value (INR) |
| 2.0x | 1,330 |
| 2.5x | 1,663 |
| 3.0x | 1,995 |
📌 Conclusion: Even conservative P/B multiples now support valuations around or above the INR 1,400 mark.
3. Simplified DCF-Based Intrinsic Value (Assumptive)
Assumptions:
- Net Profit CAGR: 15% (FY26–FY30)
- Cost of Equity: 13.5%
- Terminal Growth Rate: 4%
- FY25 Adjusted Net Profit (PAT) base: INR 443 crore
👉 DCF Estimate: INR 1,600 – 2,000 per share, assuming continued earnings normalization and credit cost control.
Hero FinCorp IPO Valuation
Hero FinCorp IPO Fair Value Summary:
| Method | Fair Value Estimate (INR) |
| Peer P/E (15x–20x Adj. EPS) | 512 – 682 |
| P/B (2.0x–3.0x on Adj. BVPS) | 1,330 – 1,995 |
| Simplified DCF Estimate | 1,600 – 2,000 |
🔍 Interpretation
- The adjusted FY25 numbers substantially shift the valuation landscape.
- Hero FinCorp now appears undervalued at INR 1,400, rather than overvalued, if adjustments are fully priced in.
- However, investor caution may persist until reported earnings visibly align with these adjustments in future quarters.
Peer Valuation History & Sector Context (for Perspective)
- Bajaj Finance: Maintains a premium (~33.6x P/E) for pristine asset quality, digital moat, and consumer franchise.
- Chola: 30.6x P/E due to granular southern India exposure and better GNPA profile.
- Shriram: At 14.8x P/E, offers value with superior ROE in used vehicle and rural financing.
Hero FinCorp may warrant a discount to Bajaj/Chola due to current asset quality and transition risks but justifies parity with Shriram or better if FY26 proves stabilizing.
Strategic & Promoter Dynamics
- Private equity investors exiting at INR 1,400/share suggests they are booking gains after a growth cycle.
- Promoter holding of 79.54% post-IPO ensures strategic control but limits free float and liquidity.
- Upcoming management transition and senior resignations could create some execution risks in H1 FY26.
Hero FinCorp IPO Valuation: Risks & Red Flags
| Risk | Description | Potential Impact |
|---|---|---|
| Asset Quality Deterioration | Rising NPAs in unsecured personal loans | EPS impact, multiple compression |
| Regulatory Overhang | RBI increased risk weights on unsecured lending | Higher CoF, lower profitability |
| Leverage Risk | D/E of 5.8X may become unsustainable in a slowdown | Rating downgrade, equity dilution |
Conclusion
With adjusted PAT and net worth, the IPO price of INR 1,400 appears fair Value of Hero Fincorp IPO. Investors may still want to monitor asset quality trends and execution risks in FY26, but on valuation grounds alone, Hero FinCorp now trades at sector-comparable levels with long-term upside potential.
Recommendation: Fairly priced after adjustments. Ideal for long-term investors willing to wait through near-term credit normalization.
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