Hero Fincorp to raise Rs 2,000 cr for growth

Hero Fincorp could raise ₹2,000 crore equity funding from existing and new investors to create a capital buffer for its business, according to people familiar with the matter.

As part of the funding plan that is under deliberation,

and members of the Munjal family through their investment companies could bring in ₹1,100-1,200 crore of equity funding with new investors bringing in the remaining amount. The Munjal family are the promoters of Hero MotoCorp and also have substantial shareholding in Hero Fincorp, which is registered as a non-bank finance company.

Hero Fincorp has initiated a valuation exercise before the equity funding round will be finalised. The final contributions of the existing and new investors could change based on the valuation report, according to people cited.

Discussions are ongoing with private equity investors like Apollo Global Management, though a final decision is yet to get formalised. Hero Fincorp declined to comment on what it termed “market speculation”. Apollo Global Management declined to comment.

The company last raised equity funding in 2019-20 when existing investors pumped in Rs 1,074 crore. That round valued the company at around $1.3 billion.

Hero Fincorp was originally known as Hero Finlease. The company has been in existence for almost three decades. It was initially engaged in financing suppliers of Hero Honda. The company assumed its current form after the restructuring of Hero Honda Motors in 2011, which led to the exit of Honda as the company’s joint venture partner.

After 2013, Hero Fincorp forayed into financing of two-wheelers and expanded in the SME and corporate financing segment. It also obtained a housing finance business licence in 2017. The company has a loan book of around Rs 20,000 crore, which is split equally between the retail and corporate loan segments. It had a capital adequacy ratio of 19%, well above prescribed regulatory limits, for the financial year ended March 2021.

Hero Motocorp owns around 40% stake. Family investment companies and members of the Munjal family in their individual capacity own 30-35% stake. The other shareholders include ChrysCapital, Credit Suisse and Apis Partners as well as dealers of Hero Motocorp.