Hero FinCorp Gets SEBI Nod for Rs 3,668 Crore Public Issue

Hero FinCorp, the financial services arm of two-wheeler giant Hero MotoCorp, has received approval from the Securities and Exchange Board of India (SEBI) for its Initial Public Offering (IPO). The company aims to raise Rs 3,668 crore from the primary market.

According to the Draft Red Herring Prospectus (DRHP) filed in August last year, the IPO comprises a fresh issue of equity shares worth Rs 2,100 crore and an Offer for Sale (OFS) of Rs 1,568 crore by investor shareholders.

The shareholders selling their stakes in the OFS include AHVF II Holdings Singapore II Pte. Ltd, Apis Growth II (Hibiscus) Pte. Ltd, Link Investment Trust (through Vikas Srivastava), and Otter Ltd.

As per the draft documents, the proceeds from the fresh issue will be used to strengthen the company’s capital base and support its future lending operations.

Operating as a non-banking financial company (NBFC), Hero FinCorp offers a wide range of financial services, primarily targeting retail customers and micro, small, and medium enterprises (MSMEs) across India. The company was incorporated in December 1991 as Hero Honda FinLease Ltd and was renamed Hero FinCorp Limited in 2011.

In its DRHP, the company revealed that over 99% of its two-wheeler loans were sourced through Hero MotoCorp’s dealerships. Any decline in demand for Hero vehicles could significantly impact loan disbursals and revenues. It also disclosed a heavy reliance on retail and MSME loans, which account for over 85% of its assets under management (AUM). Any downturn in these sectors could adversely affect business performance.

As of March 2024, Hero FinCorp reported an AUM of Rs 51,821 crore, with retail and MSME lending segments contributing 65% and 21%, respectively. Since its inception, the company’s customer base has grown to 1.18 crore as of March 2024.

The IPO is being managed by a consortium of book running lead managers, including JM Financial Ltd, BofA Securities India Ltd, HSBC Securities and Capital Markets (India) Pvt Ltd, ICICI Securities Ltd, Jefferies India Pvt Ltd, and SBI Capital Markets Ltd. The company’s equity shares are proposed to be listed on both the BSE and NSE.