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Hero Fincorp Ltd., the financial services unit of two-wheeler giant Hero MotoCorp, has formally initiated its journey to the public markets by filing a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The non-banking financial company (NBFC) is targeting a total issue size of ₹4,000 crore.

IPO Structure and Objectives

The proposed initial public offering consists of two main components. The company plans a fresh issue of equity shares amounting to ₹1,500 crore. The net proceeds from this primary issuance are earmarked for augmenting the company's Tier-I capital base, a critical move to support future business growth and manage capital adequacy.

Additionally, the IPO includes an offer-for-sale (OFS) component of up to ₹2,500 crore by the company's existing promoters. This segment will see members of the Brijmohan Lall Munjal family, including Pawan Munjal, divest a portion of their holdings. Promoters currently hold a significant 79.9% stake in the company.

Company Profile and Financials

As the captive financing arm for Hero MotoCorp, Hero Fincorp holds a strategic position in the market. Its core business includes two-wheeler financing, alongside a diversified portfolio of term loans for small and mid-market companies, personal loans, and loans against property. The company's extensive reach covers over 4,000 cities and towns, serving a customer base of 10.7 million.

Financially, Hero Fincorp managed assets worth ₹47,816 crore as of December 31, 2023. For the nine-month period ending on that date, the company reported a total income of ₹5,420 crore and a profit after tax of ₹504 crore.

Market Positioning

This public offering positions Hero Fincorp to unlock value and strengthen its financial footing in the competitive NBFC landscape. Beyond the promoters, the company is backed by prominent private equity investors such as Apollo Global Management and ChrysCapital. The capital infusion from the IPO is expected to enhance its lending capacity and solidify its market presence, particularly in the consumer finance sector driven by its association with Hero MotoCorp.