The NBFC segment in the Banking and Financial Services sector plays an immense role in the economy due to their diversity and reach to middle income households. As per RBI, as of March 2021, the total asset worth of NBFCs was 54 lakh crores which together forms up the 25% of the total assets held up in the entire banking sector in India. Past data suggests that the sector has grown with an average growth rate of 18% approx. for the last five years. This fact release from RBI multifolds the importance of such NBFC companies and improves their future forecast of being into the business.
Hero FinCorp is a Non-Banking Financial Company (NBFC) started in December 1991 under the leadership of Late Sh. Brijmohan Lall Munjal, a group founder. It was formerly known as Hero Honda FinLease Ltd. and since July 2011,operates under the name of Hero Fincorp Ltd. The company is primarily engaged in disbursement of “hassle-free” corporate and retail loans at competitive rates. It has subsidiaries such as Hero Housing Finance Ltd. which help satisfy one of the basic needs of an individual i.e., House. The journey of Hero Fincorp Ltd, since incorporation has been quite impressive from getting an equity of 106 crores in Feb 2013 to crossing happy 5 million plus customers in 2020.
The vision of the company is to become a behemoth of financial services on which individuals can rely on and can get credit easily. On the other hand, the mission includes being transparent in its process which would help individuals to trust their loan partner.
Hero Fincorp primarily operates in India. The corporate office and operations center is located in New Delhi. It operates through dealers across India based on the specified loan portfolio. The network of dealers is spread across all states and UT giving an edge to know its target audience locally.
The business model of Hero Fincorp is to provide the individuals with loans at competitive and affordable interest rates in one click with minimum paperwork involved. The NPAs of such business models are generally less than that of commercial banks due to involvement of lower amount loans.
The product portfolio of Hero Fincorp Ltd. is shown above. It can be broadly classified into two categories i.e., Retail and Corporate Loan which is further divided into category wise. Besides, it is also engaged in providing instant digital cash instant loan and home loan. The diversified product portfolio enables the Inc. to reach various segments of the consumer, especially, in the middle income category.
Loan Assets Mix (%. INR Crores)
Source: Annual Reports
Category-wise Shareholding Distribution (FY20)
Source: Annual Reports
The shareholding pattern of Promoters spiked from 7.2 cr shares to 10.1 cr shares. On the other hand, the shareholding of non-promoters also increased from 2.06 cr shares to 2.60 cr shares in the span of 5 years. The graph portrayed above is a glimpse of the percentage of shareholding of promoters since 2017. The overall trend remained positive and constant for the past two years. The increasing shareholding figure indicates increased trust of the promoters in the business and helps to gain investors confidence in the business.
NBFC being a competitive segment to operate, there exists strong competitive players well established in the market. Some of the major peers are listed below:
Tata Capital Financial Services Limited
Aditya Birla Finance Limited.
Adani Capital Private Limited.
Cholamandalam Investment & Finance Company Ltd.
The key players listed above possess a diversified range of business under their parent company. The basic peer to peer comparison is shown below:
Return on Equity %
Gross NPA %
Capital Adequacy Ratio %
Cost to Income Ratio %
Return On Asset %
Consolidated Balance Sheet (All amounts are in Rupees Crores except share data and unless otherwise stated)
|Cash and cash equivalents||1106.87||2343.94||106.68||0.69|
|Bank balance other than cash and cash equivalents||116.13||0.52||0.55||0.48|
|Other financial assets||113.11||32.74||51.62||41.2|
|Current tax assets (net)||42.43||40.84||16.39||10.12|
|Deferred tax assets (net)||341.04||254.55||176.63||123.14|
|Property, plant and equipment||53.05||72.27||82.08||96.26|
|Capital Work in progress||-||0.04||-||-|
|Intangible assets under development||0.62||0.61||0.16||-|
|Other non-financial assets||40.18||27.6||25.41||18.61|
|Liabilities and equity|
|Total outstanding dues of micro enterprises and small enterprises; and||0.88||1.3||0.02||0.08|
|Total outstanding dues of creditors other than micro enterprises and small enterprises||256.79||167.36||119.58||72.77|
|Borrowings (other than debt securities)||19156.51||16130.76||9334.69||4813.65|
|Other financial liabilities||595.58||405.62||569.42||359.51|
|Current tax liabilities (net)||8.6||60.14||33.53||14.87|
|Other non-financial liabilities||45||42.28||33.85||26.23|
|Equity share capital||127.31||121.54||114.15||98.45|
|Total liabilities and equity||29996.03||27199.13||21068.73||13522.55|
Consolidated Statement of Profit and Loss (All amounts are in Rupees Crore except share data and unless otherwise stated)
|Revenue from operations|
|Profit on sale of investments||23.94||58.16||47.28||3.64|
|Net gain on fair value changes||22.66||-||2.63||3.19|
|Total revenue from operations||4278.08||3799.86||2518.47||1694.51|
|Impairment allowance on loans||1417.74||649.86||174.3||136.15|
|Employee benefits expenses||285.61||302.76||237.55||147.61|
|Depreciation and amortization||35.21||36.33||24.88||26.52|
|Profit before tax||71.07||448.79||391.04||212.36|
|(i) Current tax||109.15||248.48||198.05||125.44|
|(ii) Tax adjustment relating to earlier year||-3.17||-0.12||-||-3.25|
|(iii) Deferred tax (credit) (net)||-86.53||-77.6||-52.76||-52.76|
|Total tax expense||19.45||170.76||145.29||69.43|
|Profit after tax||51.62||278.03||245.75||142.93|
|Other comprehensive income/ (loss)|
|Items that will not be reclassified to profit or loss :|
|Remeasurement of (losses) on defined benefit plans||-0.12||-1.05||-2.09||-0.74|
|Income tax impact on above||-0.04||0.32||0.73||0.26|
|Other comprehensive income/ (loss) for the year, net of tax||-0.16||-0.73||-1.36||-0.48|
|Total comprehensive income/ (loss) for the year, net of tax||51.46||277.3||244.39||142.45|
|Earnings per equity share|
|Profit for the year attributable to|
|Equity Shareholder of Parent||51.62||278.03||245.75||142.93|
|Total Comprehensive Income of the year, net of tax|
|Equity Shareholder of Parent||51.46||277.3||244.39||142.45|
|Earnings per equity share|
|Equity Shareholder of Parent for the year|
News & Announcements:
As per the latest press release by Hero Fincorp, a corpus of INR 2000 crores has been raised of Growth Capital from Apollo, Hero Motocorp and other entities. This fundraise would help the company to work upon diversification of its product portfolio across multiple segments.
On July 20, 2018, a corrigendum was issued by the company. As per the corrigendum, rights issue was made for a total amount of INR 11,81,34,75,000 to the existing shareholders.
It became the first and foremost company which raised a Secured Overnight Financing Rate abbreviated as SOFR by raising a corpus of INR 2631 crores approximately at 168 basis point higher than SOFR.
The NBFC aims to serve more than 15 million customers by the end of fiscal year 2025.
Out of the fresh fund raise, Hero Motocorp is expected to invest about 700 crores in its financial arm Hero Fincorp.
Future vision insights of Jt. MD & CEO, Abhimanyu Munjal: “This fresh capital infusion will fuel our growth to USD 10 Billion in Assets, and enable us to serve over 15 Million customers by FY-25. This is in keeping with our mission of Empowering Every Indian’s Dream of Upward Mobility. I am excited to partner with Apollo in this journey as they bring significant experience and relevant domain knowledge; and I am sure this strategic partnership would be mutually beneficial to both groups.”
Hero Housing Finance Ltd, a housing arm of Hero Fincorp Ltd, currently holds assets under management (AUM) of INR 2369.20 crores in the FY 2020-21 from INR 1793.06 crores in the FY 2019-20.
The total loan disbursements stood at Rs.13822 cr. in FY21 from Rs.17829 cr. in FY20. This primarily owed to the impact of Covid-19 and nationwide lockdown across the country.
The loan assets reported in FY21 were Rs.25121 cr. against Rs. 23389 cr in FY20.
It has enabled a strong revenue of 4045.93 crores in FY 2020-21, a growth of 10.44% from the previous financial year 2019-20.
The loan asset mix percentage has increased in the retail segment as compared to other categories from 31% in FY’17 to 56% in FY’21.This indicates a strong rural and urban demand and forms a major share of its customer base.
The profit after tax has increased over the years. However, spread of Covid-19 across the globe has hit the operations which is indicative from PAT figures in FY '21.
It aims to grow USD 10 Billion in Assets.
The disbursement of loans has seen a sharp increase since FY ‘17. It increased from 6735 crores to 17,829 crores in FY ‘20 and then decreased to 13822 crores in FY ‘21 primarily due to suppressed demand and income effect in the pandemic. The business cycle fluctuation during this suppressed time hit the operations and the effect of which can be witnessed on the financials.
The capital adequacy ratio is consistently above the threshold of RBI guidelines, which is an add-on to the business.
|Gross NPA to Loan Assets||7.40%||6.50%||4.50%||4.10%|
|Credit Cost to Average Assets||5.60%||2.80%||1.00%||2.00%|
|Profit After Tax (In Crores)||70.6||310.2||268.4||145.8|
|Debt to Equity Ratio||4.3||4.5||4.5||4.8|
|Capital Adequacy ratio %||19.7||19.6||19.2||18.7|
|Credit Cost to Avg. Asset||5.6||2.8||1||2|
|Cost of Borrowing %||7.8||8.5||8.3||8|
|Opex to Average Asset %||4.2||4.6||4.7||5.2|
Sell or Purchase Share (Tentative Price)