In preparation for its upcoming initial public offering (IPO), Hero FinCorp, the financial services arm of Hero MotoCorp, has taken significant steps to strengthen its financial position. The company has written off bad loans totaling approximately ₹1,200 crore, representing about 3.4% of its loan book. This move is aimed at cleaning up its financial records ahead of the public market debut.

Established in December 1991 as Hero Honda FinLease Ltd., Hero FinCorp has evolved into a diversified financial services company. It offers a wide range of financing solutions, including two-wheeler financing, affordable housing loans, education loans, and lending to small and medium enterprises (SMEs). The company boasts a presence in over 4,000 cities and towns across India and nearly 2,000 retail financing touch points within Hero MotoCorp's network.

For the nine months ending December 31, 2023, Hero FinCorp reported 'impairment on financial instruments' amounting to ₹1,214.71 crore, primarily due to the write-off of bad loans. This figure is comparable to the impairments of ₹1,204.79 crore recorded in the entire fiscal year 2022-23. Credit rating agency ICRA noted that while the company's asset quality profile has shown improvement during this period, a significant part of it resulted from high write-offs undertaken by the lender. The gross and net stage 3 ratios improved to 4.7% and 2.3%, respectively, as of December 31, 2023, from 5.4% and 2.8% as of March 31, 2023.

Despite these substantial write-offs, Hero FinCorp has demonstrated robust growth. The company recorded a 25% increase in assets under management (AUM) in the first nine months of FY24, growing from ₹39,381 crore to ₹49,127 crore. Disbursals also rose by 26%, from ₹19,898 crore to ₹24,979 crore over the same period. Notably, the company registered a 168% surge in profit after tax, increasing from ₹461 crore in April-December 2022 to ₹736 crore in the corresponding months of 2023.

Looking ahead, Hero FinCorp has ambitious plans. The company is targeting a net profit of ₹1,000 crore in the financial year 2024-25, which would represent a 30% year-on-year increase. To achieve this, the company is expanding its nationwide coverage, aiming to serve customers across a wide range of geographies and income segments. This includes a diversified product suite covering retail individuals, retail SMEs, and corporate segments.

In terms of its IPO plans, Hero FinCorp has shortlisted a syndicate of eight investment banks to launch a substantial IPO of nearly ₹4,000 crore in 2024. The selected advisors include JM Financial, BofA Securities, Jefferies, ICICI Securities, HSBC Securities, UBS, SBI Capital, and HDFC Bank. Hero MotoCorp owns around a 40% stake in Hero FinCorp, while the promoters, the Munjal family, hold around 35-39%. The remaining shares are held by private equity investors such as Apollo Global Management, ChrysCapital, Credit Suisse, and some dealers of Hero MotoCorp.

As Hero FinCorp prepares for its IPO, it is taking decisive actions to strengthen its financial health and expand its market presence. The company's strategic initiatives and robust growth trajectory position it well for its forthcoming public offering.

For investors interested in exploring opportunities in the unlisted market, platforms like Wealth Wisdom India Pvt Ltd. (WWIPL) offers access to a range of pre-IPO companies. WWIPL provides detailed information and investment options in companies like Hero FinCorp, allowing investors to participate in the growth story before these companies go public.