New Delhi: Hero FinCorp, an arm of India’s largest two-wheeler maker, Hero MotoCorp, has interviewed investment banks over the past two weeks as it searches for underwriters for a planned initial public offering (IPO) of shares that could raise INR 4,000 crore, according to people aware of the matter. The financing arm of the two-wheeler maker that provides retail and business loans has interviewed 7-8 investment banks that include domestic and international players. It could finalise the list of advisers soon, according to people in the know.
The proposed IPO could value the non-bank finance lender at USD 1.8 billion or nearly INR 14,932 crore, as per the sources. Hero FinCorp had a book value of INR 5,288 crore at the end of 2022-23. The valuation being sought is about 2.8 times the company’s book value.
Moneycontrol reported on May 11 citing dealers that Hero FinCorp’s shares were trading at INR 1,030 a piece or almost 2.5 times the company’s book value in the unlisted market. That would give the company a value of INR 13,220 crore in the unlisted market.
Hero MotoCorp did not respond to ET’s queries. Mails sent to Hero FinCorp’s chief executive officer Abhimanyu Munjal also had not elicited a response until press time on Sunday.
Hero MotoCorp owns around 40% stake in Hero FinCorp. The Munjal family, the promoter of Hero group, owns about 30% stake. The rest is distributed between private equity investors such as ChrysCapital, Apollo Global, Credit Suisse and Apis Partners as well as dealers of Hero MotoCorp. The company’s most recent funding took place in January last year when Hero MotoCorp and new and existing investors pumped in INR 2,000 crore as equity. Apollo Global joined the company’s list of shareholders after that round, which valued the financier at USD 1.4 billion or INR 12,000 crore.
“This is a good time for non-bank finance companies to tap the equity market. SBFC Finance and Utkarsh Small Finance Bank both listed successfully. Investors are exuberant about the sector,” a senior investment banker said on condition of anonymity. Hero FinCorp posted interest income of INR 5,363 crore for 2022-23. It had a net profit of INR 457 crore. Hero FinCorp’s loan book is around INR 36,000 crore.
The company was originally known as Hero Finlease. It 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.
Pawan Munjal-helmed Hero MotoCorp on Thursday reported revenues of INR 8,767 crore for the quarter ended June 30 of the current financial year. Revenues rose 4.5% year-on-year.
