Hero FinCorp, a subsidiary of India’s largest two-wheeler manufacturer, Hero MotoCorp, has recently engaged in discussions with investment banks to explore potential underwriters for an upcoming initial public offering (IPO). According to the Economic Times report, the IPO, if successful, could raise approximately Rs 4,000 crore. Hero FinCorp is the financing arm of the prominent two-wheeler maker, providing retail and business loans. In the past two weeks, the company has conducted interviews with around 7-8 investment banks, comprising both domestic and international players, in its search for suitable advisors.
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The report added that sources suggest that the company is on the verge of finalizing the list of advisors for the IPO. The anticipated public offering could place a valuation of $1.8 billion (roughly Rs 14,932 crore) on the non-bank finance lender. At the conclusion of the 2022-23 fiscal year, Hero FinCorp reported a book value of Rs 5,288 crore, and the valuation sought translates to approximately 2.8 times the company’s book value.
As quoted by The Economic Times, reports from Moneycontrol indicated that Hero FinCorp’s shares were trading at Rs 1,030 apiece in the unlisted market, reflecting an approximate valuation of Rs 13,220 crore. Hero MotoCorp, the parent company, holds around 40 per cent stake in Hero FinCorp, while the Munjal family, the promoter of the Hero Group, owns approximately 30 per cent.
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Hero FinCorp’s most recent funding round occurred in January of the previous year, when a total of Rs 2,000 crore was infused by Hero MotoCorp and both new and existing investors. According to the Economic Times report, Apollo Global became a new shareholder following that round and was valued at Rs 12,000 crore.
Market sentiments are optimistic for non-bank finance companies to venture into the equity market, fueled by successful listings of other players in the sector like SBFC Finance and Utkarsh Small Finance Bank. Hero FinCorp’s financials for 2022-23 reveal interest income of Rs 5,363 crore and a net profit of Rs 457 crore. The company’s loan book stands at around Rs 36,000 crore.
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The company’s origins trace back nearly three decades when it was primarily involved in financing Hero Honda’s suppliers. It underwent transformation in 2011 after the restructuring of Hero Honda Motors, which marked Honda’s exit as the joint venture partner. Since then, Hero FinCorp has expanded its offerings to include financing of two-wheelers, ventured into SME and corporate financing, and even secured a housing finance business license in 2017.
In related news, Hero MotoCorp reported revenues of Rs 8,767 crore for the quarter ended June 30, with a 4.5 per cent year-on-year increase. The quarter also saw a net profit of Rs 825 crore, indicating a significant 32 per cent rise year-on-year.
