Headline number: The company posted a loss of ₹163 crore in H1 FY26, compared to a profit of ₹66 crore in H1 FY25 — a sharp swing into the red.
What caused the loss:
Revenue-cost squeeze — Net Interest Income fell 6.8% (down ₹154 crore), while finance costs rose 5.4% (up ₹89 crore). Net Interest Margin compressed 68 basis points, from 9.66% to 8.98%.
Rising bad loans — Gross NPA crossed 5%, hitting 5.41%, a jump of 78 basis points in just six months, largely linked to stress in unsecured lending.
Fair value losses — A ₹255 crore fair-value hit (vs ₹156 crore last year) added roughly ₹99 crore extra to the loss.
Rising operating costs — Employee costs up 10% (₹325 crore), other expenses up 5% (₹865 crore), even as revenue declined.
Stagnant growth — Loan book grew just 0.2%, to ₹47,086 crore.
Strategic shift: The company is pulling back from unsecured lending and pivoting toward secured products — two-wheeler financing (via the Hero MotoCorp ecosystem), loans against property, and secured MSME loans — targeting 14% disbursement growth in FY26 through this shift.
Positives still in place: Strong Hero brand backing, a prudent long-term strategic correction, still-reasonable NIM (~9%) for the NBFC sector, wide distribution network, and AA+ credit ratings from CRISIL, ICRA, and CARE.
What to watch next: Whether GNPA stabilizes, when profitability turns positive again, whether NIM holds around 9%, how fast the secured portfolio scales, and whether operating and funding costs come under control.
Bottom line: Declining revenue, rising costs, compressing margins, increasing NPAs, and a swing to loss — Hero FinCorp is mid-transition from unsecured to secured lending, with near-term pain expected before the pivot pays off.