Hero FinCorp Files for Rs 3,668 Crore IPO with SEBI
Hero FinCorp, the financial services arm of renowned two-wheeler manufacturer Hero MotoCorp, has taken a significant step towards raising capital by filing preliminary papers with the Securities and Exchange Board of India (SEBI). The proposed Initial Public Offering (IPO) aims to generate Rs 3,668 crore, combining a fresh issue of equity shares worth Rs 2,100 crore and an Offer For Sale (OFS) amounting to Rs 1,568 crore by investor shareholders.
Details of the IPO
Components of the IPO
The fresh issue of equity shares is valued at ₹2,100 crore. Additionally, there is an Offer for Sale (OFS) amounting to ₹1,568 crore by various investor shareholders.
The Draft Red Herring Prospectus (DRHP) submitted on Wednesday provides detailed information about these offerings, including the participation of key shareholders in the Offer for Sale (OFS). The shareholders taking part in the OFS are AHVF II Holdings Singapore II Pte. Ltd, Apis Growth II (Hibiscus) Pte. Ltd, Link Investment Trust (represented by Vikas Srivastava), and Otter Ltd.
Use of Proceeds
The proceeds from the fresh issue will be primarily used to bolster Hero FinCorp’s capital base. This increase in capital is aimed at meeting future funding requirements for the company’s lending activities, enabling it to expand its reach and services.
Hero FinCorp’s Business Overview
Diverse Financial Offerings
Hero FinCorp is a non-banking financial company (NBFC) that offers a wide array of financial products. Its services are primarily targeted at the retail sector and micro, small, and medium enterprises (MSME) customer segments in India. This diversification helps the company cater to a broad customer base, providing tailored financial solutions to meet varying needs.
Assets Under Management (AUM)
As of March 2024, Hero FinCorp had assets under management (AUM) amounting to Rs 51,821 crore. The company’s portfolio is diversified, with the retail and MSME loan verticals contributing significantly—65% and 21% respectively—to the total AUM. This substantial AUM highlights the company’s robust presence in the financial market and its ability to manage a large volume of assets effectively.
Customer Base
Since its inception in 1991, Hero FinCorp has grown its customer base significantly. As of March 2024, the company serves approximately 1.18 crore customers. This extensive customer base is a testament to Hero FinCorp’s trusted services and its ability to meet the financial needs of a diverse clientele.
Key Players in the IPO
Book Running Lead Managers
The IPO is backed by a strong consortium of book running lead managers. These include:
- JM Financial Ltd
- BofA Securities India Ltd
- HSBC Securities and Capital Markets Private Ltd (India)
- ICICI Securities Ltd
- Jefferies India Private Ltd
- SBI Capital Markets Ltd
This team of lead managers is tasked with ensuring the successful execution and management of the IPO, leveraging their expertise to attract investors and facilitate smooth operations.
Listing on Stock Exchanges
The equity shares of Hero FinCorp are proposed to be listed on two of India’s leading stock exchanges:
- Bombay Stock Exchange (BSE)
- National Stock Exchange (NSE)
Listing on these major exchanges will provide the company with greater visibility and access to a broader investor base, enhancing its market presence and liquidity.
Strategic Importance of the IPO
Strengthening Capital Base
The primary objective of the IPO is to strengthen Hero FinCorp’s capital base. By raising Rs 2,100 crore through the fresh issue, the company aims to secure the necessary funds to support its future lending activities. This infusion of capital will enable Hero FinCorp to expand its operations, reach new customer segments, and enhance its service offerings.
Meeting Funding Requirements
The proceeds from the IPO will also be used to meet the company’s funding requirements. This includes supporting its lending activities, ensuring that Hero FinCorp has sufficient capital to continue providing financial solutions to its growing customer base. The capital raised will be instrumental in driving the company’s growth and sustainability in the competitive financial services market.
Investor Confidence
The participation of notable investors in the OFS portion of the IPO reflects strong confidence in Hero FinCorp’s business model and growth potential. This confidence is further bolstered by the company’s consistent performance and its ability to adapt to changing market dynamics.
Conclusion
Hero FinCorp’s proposed IPO marks a significant milestone in its growth trajectory. With a strategic plan to raise Rs 3,668 crore, the company is well-positioned to strengthen its capital base, meet future funding needs, and expand its footprint in the financial services sector. The support of prominent book running lead managers and the planned listing on major stock exchanges will further enhance its market presence and investor confidence.
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