Hero FinCorp, the financial services arm of Hero MotoCorp, has received approval from the Securities and Exchange Board of India (SEBI) to launch its much-anticipated initial public offering (IPO). The total issue size is pegged at ₹3,668 crore, comprising a fresh issue of ₹2,100 crore and an offer for sale (OFS) worth ₹1,568 crore by existing shareholders.

The company filed its Draft Red Herring Prospectus (DRHP) with SEBI on July 31. As per the filing, the OFS will see participation from key investors including AHVF II Holdings Singapore II Pte. Ltd, Apis Growth II (Hibiscus) Pte. Ltd, Link Investment Trust (represented by Vikas Srivastava), and Otter Ltd. Proceeds from the fresh issue will be utilized to bolster the company’s capital base and support future lending activities.

Company Overview
Founded in December 1991 as Hero Honda FinLease Ltd, Hero FinCorp has evolved into a diversified non-banking financial company (NBFC) under the leadership of Abhimanyu Munjal. The company offers a wide range of financial products such as two-wheeler loans, affordable housing finance, education loans, and SME funding solutions.

However, the NBFC is currently navigating a challenging environment. During the first three quarters of FY25, loan write-offs surged by 80%, rising from ₹1,214.7 crore to ₹2,180.9 crore. The company sold over 2.95 lakh written-off loans with a book value of ₹1,874.73 crore but managed to recover only ₹49.85 crore. As of September 30, 2024, Hero FinCorp’s assets under management (AUM) stood at ₹53,642 crore.

FY25 Financial Performance
Hero FinCorp reported a 15% increase in interest income in FY25, growing from ₹7,479 crore to ₹8,589 crore. Other income also saw a robust 49% jump, reaching ₹1,314 crore from ₹880 crore. However, these revenue gains were undermined by rising costs. Interest expenses rose to ₹3,827 crore from ₹3,097 crore, while operating expenses increased from ₹2,513 crore to ₹2,935 crore. Provisions and contingencies more than doubled, escalating over 67% to ₹2,884 crore from ₹1,722 crore.

These mounting expenses took a toll on profitability. Net profit (PAT) declined sharply from ₹637 crore in FY24 to ₹110 crore in FY25. Likewise, earnings per share (EPS) plummeted from ₹50.16 to ₹8.63—an 82% drop, reflecting the strain on the company’s bottom line.

Valuation Snapshot
Despite the decline in profitability, Hero FinCorp continues to command a strong market valuation. As of FY25, the company's market capitalization stands at ₹16,880.5 crore. Its Price-to-Earnings (P/E) ratio is an elevated 153.53, signaling investor optimism about future growth rather than current earnings. The Price-to-Book (P/B) ratio is 2.93, indicating that the stock trades at nearly three times its book value.

On the flip side, the Return on Equity (ROE) has dropped to a modest 1.91%, pointing to reduced shareholder returns. The debt-to-equity ratio remains high at 8.33—characteristic of NBFCs—but it underscores the need for cautious monitoring of leverage levels as the company expands.