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Hero Fincrop IPO
Hero Fincrop Limited
Hero Fincrop IPO Details
| Bidding Dates | Min. Investment | Lot Size | Price Range |
|---|---|---|---|
| To be announced | -- | -- | -- |
| Issue Size | IPO Doc |
|---|---|
| 3668.13Cr | DRHP PDF |
About Hero Fincrop
Founded in
1991
Managing director
Mr Abhimanyu Munjal
Parent organisation
Hero Fincrop Limited
Strengths & Financials of Hero Fincrop
Strengths
Risks
Hero Fincorp claims to have strategically expanded its product portfolio beyond two-wheeler loans to include a wide range of secured and unsecured loans, catering to both retail and MSME customers. As of FY24, retail and MSME loans accounted for 65.08 percent and 20.80 percent of its total assets under management (AUM).
Hero Fincorp claims to benefit from a deep-rooted relationship with Hero MotoCorp Limited, leveraging its brand recognition and extensive dealer network. In FY24, Hero MotoCorp Limited held a 41.19 percent equity stake in Hero Fincorp and provided financing for a significant portion of Hero MotoCorp’s two-wheeler sales.
The company claims to have developed a comprehensive, omnichannel distribution network that spans 18,603 pin-codes across India, aided by both digital and physical channels. Hero Fincorp also claims to source a substantial portion of its business through partnerships with 3,612 partners, including used car dealers, digital partners, and direct sales agents (DSAs).
Hero Fincorp claims to follow a ‘customer first approach’ that allows it to design customised products for retail and MSME clients, addressing unique financing needs across metro, urban, and rural regions. The company further states this approach enhances cross-sell potential, as demonstrated by a product per customer (PPC) ratio of 4.25 in FY24, 3.15 in FY23, and 3.52 in FY22.
The company claims to integrate technology seamlessly into customer onboarding, underwriting, loan servicing, and collections, providing a fully digital experience. It claims to leverage artificial intelligence (AI), machine learning (ML), and real-time analytics to improve customer acquisition, reduce wait times, and streamline operations, boosting both operational efficiency and customer satisfaction.
The company claims to have consistently improved its asset quality over the years. As of FY24, the gross non-performing assets (GNPA) ratio is 4.02 percent, a reduction from 5.11 percent in FY23 and 7.54 percent in 2022. Similarly, the net non-performing assets (NNPA) ratio has declined to 2.00 percent in 2024, compared to 2.69 percent in 2023 and 4.43 percent in 2022.
Leveraging advanced data analytics, Hero Fincorp claims to enhance its risk management by tracking credit trends and predicting default probabilities. It has integrated a technology-driven collections infrastructure, improving efficiency with a 94.42 percent collection rate in FY24, 95.07 percent in FY23, and 83.00 percent in FY22, through mobile app-based repayments and a four-tier collections team.
The company claims to maintain a well-balanced mix of short-term and long-term assets and liabilities, minimising liquidity and interest rate risks.
The company has received credit ratings of AA+ with a stable outlook from Credit Rating Information Services of India Limited (CRISIL), Investment Information and Credit Rating Agency of India Limited (ICRA), and Credit Analysis and Research Limited (CARE), and an A1+ rating for commercial papers from CRISIL, CARE, and ICRA as of FY24.
The company has witnessed a consistent increase in revenue from operations. It increased from Rs 4,738.65 crore in FY22 to Rs 6,401.59 crore in FY23 and Rs 8,290.90 crore in FY24.
Hero Fincorp sourced Rs 9,581.62 crore (99.04 percent), Rs 8,726.52 crore (99.69 percent), and Rs 8,074.88 crore (99.93 percent) of its two-wheeler loans from Hero MotoCorp Limited’s dealerships in FY24, FY23, and FY22, respectively. Any decline in demand for Hero MotoCorp’s two-wheelers could adversely affect the company’s ability to generate revenue from these loans, thereby impacting its business, results of operations, and financial condition.
The company’s retail finance business depends heavily on new-to-credit (NTC) borrowers. They accounted for 8.953.66 crore (26.55 percent) of the company’s total retail AUM in FY24, Rs 8,934.51 crore (34.06 percent) in FY23, and Rs 9,250.4 crore (46.33 percent) in FY22. The lack of credit history makes it difficult to assess these customers’ creditworthiness, which may result in higher default rates. In the event of defaults, recovering these loans, especially unsecured ones, could be challenging, potentially leading to the company’s financial losses.
Retail finance, including vehicle, personal, mortgage, and MSME loans, accounted for Rs 44,506.08 crore (85.88 percent) of the company’s total AUM in FY24, Rs 34,713.74 crore (83.14 percent) in FY23, and Rs 26,117.92 crore (79.02 percent) in FY22. Furthermore, as of FY24, 72.20 percent of these loans are extended to customers in the “Aspiring India” segment, who are vulnerable to economic downturns. Any adverse economic developments could reduce loan demand or increase default rates, negatively impacting the company’s financial condition.
The company’s promoters are involved in certain regulatory proceedings. Any adverse outcomes in these cases could be detrimental to the company’s reputation.
The company’s operations heavily depend on its information technology (IT) systems, which manage risk, deposit servicing, loan origination, and other critical functions. Capital expenditure incurred towards IT systems constituted Rs 48.43 crore (29.48 percent) of the company’s total expenditure in FY24, Rs 26.47 crore (57.51 percent) in FY23, and Rs 18.43 crore (71.79 percent) in FY22. Any internal or external disruptions, system failures, or inadequate maintenance could significantly affect customer service, operations, and the company’s reputation.
The company’s net interest income and margins are vulnerable to fluctuations in interest rates due to its fixed and floating-rate loans and borrowings. As of FY24, FY23, and FY22, Rs 37,084.04 crore (72.03 percent), Rs 31,352.22 crore (75.55 percent), and Rs 25,279.18 crore (76.72 percent) of total gross loans were extended at fixed interest rates. If interest rates rise, the company may not be able to fully pass on increased costs to fixed-rate borrowers, which could lead to lower margins, increased defaults, and reduced loan demand.
As of FY24, FY23, and FY22, unsecured loans accounted for Rs 20,275.58 crore (39.13 percent), Rs 15,521.04 crore (37.18 percent), and Rs 10,497.72 crore (31.76 percent) of the company’s total AUM, respectively. Any failure to recover receivables from these loans could adversely affect the company’s operations, cash flow, and financial condition.
The company is exposed to risks related to the devaluation or loss of collateral backing secured loans, such as property and vehicles. Secured loans accounted for Rs 30,866.24 crore (59.95 percent) of the company’s total gross loans in FY24, Rs 25,928.95 crore (62.48 percent) in FY23, and Rs 22,240.08 crore (67.49 percent) in FY22.
The company relies heavily on third-party distributors, including two-wheeler dealers, digital partners, and direct selling agents (DSAs). They accounted for 62.07 percent, 65.69 percent, and 58.02 percent of the company’s disbursements in FY24, FY23, and FY22, respectively. Any breakdown in relationships, service disruptions, or inefficiencies by these third-party service providers could impact the company’s business operations, financial condition, and reputation.
The company reported negative cash flow from operating activities amounting to Rs 9,238.83 crore in FY24, Rs 6,918.52 crore in FY23, and Rs 5,411.77 crore in FY22. Additionally, negative cash flow from investing activities amounted to Rs 129.79 crore in FY24 and Rs 474.13 crore in FY23. Furthermore, the company experienced a net decrease in cash and cash equivalents amounting to Rs 651.36 crore in FY24, Rs 124.35 crore in FY23, and Rs 232.37 crore in FY22. If cash outflows continue to exceed inflows in the future, the company may face liquidity challenges.
As of June 30, 2024, the company had outstanding financial indebtedness of Rs 43,917.86 crore. Any failure to service or repay these loans can hurt the company’s operations and financial position.
Hero Fincrop Financials
*All values are in Rs. Cr
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