About the Company

Incorporated in 1991, Hero Fincorp, part of the Hero MotoCorp group is a scaled NBFC offering a diversified suite of financial products catered primarily to the growing retail customer segment and the rapidly formalizing MSME customer segment in India. The company’s business verticals are the following: i) retail, ii)MSME, and iii) CIF loans. Its retail loans include vehicle, personal, and mortgage loans. MSME Finance includes offering MSME customers (i) secured loans in the form of loans against property and construction finance; and (ii) unsecured loans in the form of business loans and supply chain finance, to support them in the operation and expansion of their businesses, including acquiring fixed assets and meeting working capital needs. In its CIF loans segment, It offers secured loans to corporate & institutional customers such as promoters, holding companies, and operating entities of large corporations.

Strengths

1. The company benefits significantly from the strong track record and reputation associated with the long-standing “Hero” brand.
2. The company’s overall customer base is over 11.80 million customers, which includes 5 million active retail customers, 29,060 active MSME customers, and 360 active CIF customers, as of March 31, 2024.
3. The company is a strong liability franchise and has access to low-cost borrowing, and strong credit ratings of “AA+ with stable outlook” from CRISIL, ICRA, and CARE, and its commercial papers are rated “A1+” by CRISIL, CARE, and ICRA as at March 31, 2024.
4. As of March 31, 2024, The company had a positive asset liability management on a cumulative basis across the majority of the time buckets, with a surplus of 3.17 times.
5. The company has a well-integrated technology platform across functions and data-driven operations. Constant digital innovation has led to a significant improvement in its non-cash collections rate from 76.00% in Fiscal 2022 to 83.31% in Fiscal 2024.

Risks

1. The company sourced 99% of its two-wheeler loans from its Promoter, Hero MotoCorp’s two-wheeler dealership. Any decline in demand for Hero two-wheelers may adversely affect the business.
2. Changes in interest rates may affect its treasury operations, causing net interest income to decline.
3. The company extends fixed-rate and floating-rate loans to customers, and any adverse change in interest rates could cause net interest income to decline and adversely affect the business.
4. Unsecured loans comprised 39% of total assets under management, respectively. If the company is unable to recover such receivables promptly or at all, the business may be adversely affected
5. The company may face asset-liability mismatches, which could adversely affect its liquidity and consequently affect its profitability and financial condition.
6. The Indian financial services industry in which the company operates is highly competitive and the growth of the business depends on its ability to compete effectively.