Hero Fincorp Limited

Business Model Hero FinCorp is a diversified NBFC in the Hero Group ecosystem that has evolved from a two-wheeler financing specialist into a broad retail + corporate lender. The portfolio spans two-wheeler loans (still the core), new car and used car finance, personal loans, loan against property, business loans, supply chain finance, inventory funding, construction finance, partnership financing and SME/emerging-corporate lending. Its wholly owned subsidiary Hero Housing Finance Ltd covers home loans. The engine has four parts: Captive-linked origination — access to the Hero MotoCorp dealer network gives low-cost, high-volume customer acquisition at the entry level (two-wheeler loans). Lifecycle cross-sell — customers enter via a small-ticket two-wheeler loan, then get upgraded to personal loans, car loans, LAP and business loans. This is what improves unit economics per acquired customer. Distribution + digital — 2,000+ locations, 4,600+ touchpoints, 13,500+ employees, 15 Mn+ lives touched (consolidated). Over 65% of servicing requests now run through app, IVR, WhatsApp and the GenAI chatbot. Underwriting for thin-file/new-to-credit borrowers — data-driven scorecards plus local market assessment, targeting segments underserved by banks. Funding side: borrows from 35+ banks and FIs, plus ECBs, NCDs and commercial paper. Rated AA+ by CRISIL, ICRA and CARE (A1+ on CP). Revenue Model Classic spread business — borrow wholesale, lend retail, earn the margin — plus fee and distribution income. Revenue stream FY26 (₹ cr) FY25 (₹ cr) Interest income 7,505.40 7,930.28 Other charges (fees) 800.71 868.81 Insurance commission 195.41 185.53 Gain on derecognition (assignment/securitisation) 149.96 82.46 Profit on sale of investments 88.65 42.95 Total revenue from operations 8,740.15 9,110.05 Total income 8,751.56 9,152.85 Interest income is ~86% of the top line. Average cost of borrowing came down to 8.2% from 8.6%. The growing non-interest lines — insurance commission and direct assignment gains — are the capital-light additions worth tracking. FY 2025-26 Business Highlights The headline story is a deliberate shift from unsecured to secured lending — a transition year where growth and near-term profit were traded for balance sheet quality. Scale (standalone unless noted) AUM ₹51,248 cr, up just 1% from ₹50,925 cr; consolidated AUM ~₹58,663 cr Gross loan assets ₹49,397 cr vs ₹49,876 cr — effectively flat Disbursements ₹30,302 cr vs ₹30,337 cr Profitability Reported loss after tax of ₹306.56 cr vs PAT of ₹57.84 cr in FY25 On an adjusted basis (treating CCPS as equity rather than a financial liability under Ind AS 32), PAT was ₹230.65 cr, with adjusted ROE 2.6% and ROA 0.5%. The ₹537 cr swing is an accounting treatment, not an operating loss — important to understand before reading the reported number at face value. Total income down 4%; NIM compressed because of the mix shift toward secured assets Asset quality — the clear improvement GNPA improved to 4.2% from 5.5%; absolute GNPA down to ₹2,091 cr from ₹2,721 cr H2 was materially better than H1: GNPA% fell from 5.1% to 4.0%, credit costs down 15%, H2 PAT ₹178 cr (+34% over H1), customer base +32% and disbursements +27% H2 vs H1 Balance sheet Net worth ₹9,136.71 cr (adjusted); debt-equity 4.74x vs 5.16x Total borrowings ₹43,329 cr; ₹18,079 cr raised during the year CAR 16.80% against RBI's 15% requirement; LCR consistently above 120% Technology GenAI moved from pilot to production — 50+ AI use cases planned; AI now handles ~60% of customer service requests Two-wheeler loan sanction TAT under 5 minutes with 100% eKYC; onboarding simplified from 90 fields to 3 Launched Hero Pay (UPI) as a TPAP on NPCI; H.Ai chatbot handled 18 lakh+ messages Great Place to Work certified for the 9th consecutive year The investment question this raises: FY26 was flat on AUM by design, and the H2 trajectory (rising disbursements, falling GNPA, improving PAT) is what management is pointing to as the real signal. Whether that H2 momentum sustains into FY27 is the thing to watch — especially since the unsecured rundown that suppressed growth should largely be behind them.