Hero Fincorp Unlisted Shares

Genesis

Hero Fincorp Ltd. is the financial services arm of India's largest two-wheeler maker Hero MotoCorp Ltd.

It offers a wide range of solutions including two-wheeler financing, SME Lending, Personal Loans etc.

Established in 1992 as Hero Honda FinLease Limited, Hero Fincorp underwent a name change after Hero MotoCorp acquired full ownership of 'Hero Honda' following Honda Motor Company's departure from their joint venture.

Currently, the Company’s footprint extends to nearly 2000 retail outlets | 2000 corporate clients | 1000 dealerships, spanning across 1900 cities, towns, and villages.

Rating: “AA+ with stable outlook”: by CRISIL, ICRA and CARE.

Product Portfolio

The Company provides a wide portfolio of financial products including:

Retail Business:

1. Two-wheeler loans: Disbursements - 1 Million (8.78 Lakh in FY22) | Total active customer base - over 2.5 Million.
2. Asset book: Rs. 8,631 Cr. | 900 dealerships as of FY23.
3. 4,100+ touch points across 2,000 cities, towns & villages.
4. Disbursing speed: 1 loan every 10 seconds.

SME & Corporate Business:

1. 75 Locations.
2. Processing Capacity: 3,000 applications per month.
3. In FY23, Rs. 7,572 Crs. worth of loans were disbursed.
4. Asset book: Rs. 12,538 Crs.

1. Embracing Digital Initiatives: Prioritizing digital initiatives to enhance customer service and promote digital EMI payments.
2. Implement Data Analytics: Utilizing data analytics to streamline loan disbursement processes and enhance loan recovery strategies to improve operational efficiency.
3. Strengthen Loan Portfolio: Implementing robust risk management practices and ensuring prudent lending practices to mitigate credit risks.

Subsidiary: Hero Housing Finance Ltd.

1. Hero Housing Finance Limited (HHFL) is a wholly owned subsidiary of HFCL subsidiary of Hero Fincorp Ltd.
2. HHFL commenced its lending operations from April, 2018. 
3. Products: Housing loans, loan against property and construction loans.
4. Revenue from Operations - FY23: Rs. 400 Crs. | FY22: 298 Crs. | Y-o-Y Growth: 34%
5. PAT - FY23: Rs. 22.63 Crs. | FY22: Rs. 2.09 Crs. | Y-o-Y Growth: 982%

Shareholding Pattern

1. Hero MotoCorp Ltd. owns around 40% stake in Hero Fincorp.
2. Pawan Munjal, chairman of Hero Fincorp, and his extended family hold nearly 10% in the NBFC in individual capacity. The family's investment firm Bahadur Chand Investments holds over 20%.
3. Apollo Global Management is estimated to have secured a 9-10% stake in the funding round held in Feb 2022.
4. Mauritius-based Otter Limited has a significant stake of 10% in Hero Fincorp. 
5. ChrysCapital, Credit Suisse and Apis Partners are the other investors in the NBFC.

Funding Information

In its latest funding round (4^th Feb 2022), Hero Fincorp Ltd. secured ₹2,000 crore ($267 million) from several investors for business expansion plans.

Apollo Management’s stake in Hero Fincorp post funding: 10%(Approx)

Estimated Valuation: 9370 Crs

Number of outstanding Shares: 12,73,06,674

Price Per Share: Rs. 736 (As of Feb 22)

Timeline

1. 1991-2012: Incorporated as Hero Honda Finlease Ltd. | Renamed as Hero Fincorp Ltd.
2. 2013-19: Received equity infusion of INR 106 Cr. | Launched Two-Wheeler Financing business, Used Car Business | 3000 touchpoints in 1700+ locations
3. 2020: Achieved the status of India's No.1 Two-Wheeler Financier. | Among the Top 3 NBFCs in Pre-Owned Car Loans. | Secured a fund-raising agreement of INR 1,075 Cr. from PE Investors & Promoters.
4. 2021: Launched a Customer Service App. | Introduced 'SimplyCash', a digital Loan Product.
5. 2022: Launched Partnership Loans and achieved Disbursal of INR 1,900 Cr.+ in the first year.
6. 2023: Achieved the highest-ever Disbursals  in FY23 | Launched EV Financing |  Crossed 10 Mn. Customers | Recognized as 'Great Place to Work' for the 6th year in a row.

Financial Highlights:

INR in Crs

Dividend History

Highlights:

1. FY23: AUM: INR 41,497 Crs. | FY22: AUM: INR 32,953 Crs. | Growth: 26% Y-o-Y.
2. Highest ever Loan - Disbursals of INR 27,713 Cr. (Consolidated) in FY23.
3. The Company experienced a robust 35% Y-o-Y increase in revenue in FY23.
4. PAT surged significantly, shifting from a loss of ₹190 Crs, to ₹480 | Growth: 350%.
5. In FY23, GNPAs improved to 5.38% from 7.94% in FY22 | NNPAs improved to 2.79% from 4.63% in FY22.

Relevance of NBFCs in the Indian landscape:

NBFCs have emerged as a significant force in promoting financial inclusion in India by successfully catering to the underserved segments of society. 

The growing market share of NBFCs can be attributed to the lighter and more flexible regulations imposed by the RBI, as well as their focus on specific sectors and niche markets.

Key Highlights

• As of September 2023, NBFCs in the country have disbursed loans amounting to over 450 billion U.S.D.

• As per ICRA, the NBFC-Retail AUM growth rate in FY23 16-18% in FY23 | 12-14% in FY24.

• Projected CAGR of the NBFC sector:18.5% | 2021 – 2026

The two-wheeler loan market across India is estimated to be valued at over 12 Billion U.S.D by 2025.

Vehicle loans have surged by 137% in the past 3 years, becoming the second-largest loan segment after home loans.

Vehicle Finance Industry In India: CAGR of 11% | 2022-2027.

The rapid growth is driven by:

1. Low interest rates
2. Increasing ownership of two-wheelers due to their Cost-effectiveness
3. Increasing number of Production Plants being set up by Automakers
4. Increasing disposable income | Evolving consumer preferences

Key Trends:

1. Rising demand for electric vehicles: Due to Government initiatives boosting EV adoption
2. Expansion of car loans to Tier 2 and Tier 3 cities
3. Digitalization

(Source: BCG Report – Dec 23, ET-BFSI, ICRA, Statista, Mint)

17^TH October 2023: Hero Fincorp, has decided to initiate a substantial IPO in 2024. The targeted size is approximately ₹4,000 crore.  The planned offering will comprise a mix of primary and secondary share issuances. This strategy aims to raise growth capital while facilitating an exit opportunity for certain investors.

(Source: MoneyControl)

Recent Developments: (5th March 2024)

1. Hero Fincorp witnessed a 25% rise in AUM to Rs. 49,127 crore | 26% increase in Disbursals to Rs. 24,979 Crs. in the 9MFY24.
2. Ahead of its IPO, the company wrote off bad loans amounting to nearly Rs 1,200 crore, representing approximately 3.4% of its loan book.
3. Hero Fincorp reported PAT of Rs 736 Crs. in 9MFY24 | 71% growth.
4. Hero Fincorp is targeting a PAT of Rs 1,000 Crs. in FY25, as per J-MD and CEO Abhimanyu Munjal.
5. They have set-up an in-house tech and analytics centre in Bengaluru. 

Key Strengths:

1. Strong Parentage and Support from Hero Group: Being a part of the Hero group provides HFCL with significant backing, demonstrated through equity infusions and shared brand identity. This support enhances credibility and stability in the market.
2. PAN India presence of network: Widespread presence allows for greater market penetration. | 7.5 million customers.
3. Diversified Borrowing Profile: HFCL sources funds from banks, commercial papers, and bonds. This diversification reduces dependency on any single source of funding and ensures financial flexibility.
4. Adequate Capitalization Profile: HFCL has demonstrated strong capital-raising abilities, improving its capital adequacy and overall gearing levels. Capital Adequacy Ratio (CAR) - 20.57%.
5. Well-defined organizational structure | Experienced senior management team.

Key Weaknesses

1. Weak Asset Quality: Despite improvements, HFCL's asset quality remains a concern, evidenced by GNPA of 5.38%.
2. High Credit Costs Constraining Profitability: HFCL had reported net loss of ₹192 crore in FY22 caused by significant credit costs of ₹1,841 Crs. during the year. Any significant increase in the credit cost will continue to impact the profitability of HFCL.

Opportunities:

1. Untapped markets | Digital Ventures | MSME Financing
2. Hero Fincorp’s Launch of Electric Vehicle financing in 2023 offers a prime opportunity to tap into the growing market for eco-friendly transportation.

Threats:

1. Competition from finance companies and small banks.
2. External risks such as liquidity stress and political uncertainties.
3. Regulatory and compliance-related changes.

The share price of Hero Fincorp Unlisted Shares was Rs. 935 when they were first introduced in the unlisted market in March 2021.

Since then, the stock price reduced steadily and reached Rs. 680 by Jan 2023.

The share price took off post that due to improving financials and currently is Rs. 1680.

Hero Fincorp Annual Report 2023-2024

Hero Fincorp Annual Report 2022-2023

Hero Fincorp Annual Report 2021-2022

Hero Fincorp Annual Report 2020-2021

Hero Fincorp Annual Report 2019-2020

Hero Fincorp Annual Report 2018-2019