Hero FinCorp, a division of Hero MotoCorp, the two-wheeler manufacturer, in India, is currently engaging in discussions, with investment banks to execute its intended public offering (IPO) of ₹4,000 crore. This non-banking financial institution specializes in providing commercial loans. Aims to achieve a valuation of ₹14,932 crore ($1.8 billion) which clearly reflects the significant interest shown by investors in this particular sector.
Hero FinCorp, an extension of Hero MotoCorp, India’s largest two-wheeler manufacturer, has recently engaged in discussions with various investment banks over the past fortnight. This move is in pursuit of suitable underwriters for their intended initial public offering (IPO), which aims to generate around ₹4,000 crore in funds.
As a vital arm of the two-wheeler giant, Hero FinCorp specializes in offering both retail and commercial loans. During this period, they have engaged with 7 to 8 investment banks, comprising both domestic and international entities. Sources suggest that the selection of advisors may be finalized shortly.
The projected IPO could potentially place a valuation of $1.8 billion, approximately ₹14,932 crores, on this non-banking financial institution. Notably, as of the end of the fiscal year 2022-23, Hero FinCorp boasted a book value of ₹5,288 crore. The sought-after valuation is a substantial 2.8 times greater than the company’s book value.
A market insight shared on May 11 by media, referring to dealers, highlighted that Hero FinCorp’s unlisted shares were trading at ₹1,030 each, marking a valuation nearly 2.5 times higher than the company’s book value. This assessment positioned the company’s value in the unlisted market at an impressive ₹13,220 crore.
Ownership of Hero FinCorp is divided among several key stakeholders. Hero MotoCorp commands a substantial 40% stake, while the Munjal family, the driving force behind the Hero group, holds a significant 30% stake. The remaining shares are dispersed amongst private equity investors such as ChrysCapital, Apollo Global, Credit Suisse, Apis Partners, and Hero MotoCorp dealers.
A notable injection of capital occurred in January of the previous year when Hero MotoCorp and both new and existing investors collectively infused ₹2,000 crore in equity. As a result of this funding round, Apollo Global joined the ranks of shareholders, propelling Hero FinCorp’s valuation to $1.4 billion, equivalent to ₹12,000 crore.
A senior investment banker commented that the current climate is favorable for non-bank finance companies to access the equity market. Successful listings of SBFC Finance and Utkarsh Small Finance Bank have spurred investor enthusiasm within the sector. This sentiment is also mirrored in Hero FinCorp’s financial performance, as it registered an interest income of ₹5,363 crore and a net profit of ₹457 crore for the fiscal year 2022-23. Notably, the company’s loan portfolio stands at a substantial ₹36,000 crore.
Initially known as Hero Finlease, the company’s history spans nearly three decades. Initially, it primarily extended financial support to suppliers of Hero Honda. The transition to its current identity took place following the restructuring of Hero Honda Motors in 2011, culminating in Honda’s departure from the joint venture.
From 2013 onwards, Hero FinCorp diversified into two-wheeler financing and expanded its presence in the SME and corporate financing sectors. Additionally, the company acquired a housing finance business license in 2017.
The leadership of Pawan Munjal at Hero MotoCorp continues to demonstrate its prowess. The company recently announced quarterly revenues of ₹8,767 crore for the period ending on June 30 in the ongoing financial year. This marks a 4.5% year-on-year revenue increase. Impressively, the company also achieved a net profit of ₹825 crore during this quarter, reflecting a remarkable 32% rise year-on-year. Notably, Abhimanyu Munjal of Hero FinCorp is a nephew of Pawan Munjal.
In a parallel development, media reports from July 26 indicate that Hero Motors, a motorcycle components company overseen by Pawan Munjal’s cousin, Pankaj Munjal, is also contemplating an IPO.
