Apollo Global Management has decided to invest around Rs 940 crore ($125 million) of growth capital to buy into Hero Fincorp, the lending arm of the Hero Group, said people aware of the development. This is part of a larger Rs 2,000-crore capital raising exercise from existing and new investors.
The country's largest two-wheeler maker Hero MotoCorp last month said its board has accepted investing up to Rs 700 crore in the NBFC.
Apollo’s speculation is linked to certain financial parameters and values the lender at around Rs 12,000 crore ($1.6 billion), post money. The board approval came earlier in the week, the officials mentioned above added.
The corporation last raised equity funding in the financial year 2019-20 when existing investors invested over Rs 1,074 crore. That round valued the company at around $1.3 billion.
Apollo will end up owning a 9%-11% stake in the NBFC on a fully thinned basis and have a board seat. Other than flagship Hero MotoCorp that owns 40% of the company, the Munjal family, the promoters of Hero MotoCorp also have substantial shareholding in Hero Fincorp of 30-35%. The other shareholders including ChrysCapital, Credit Suisse and Apis Partners as well as dealers of Hero MotoCorp, continue.
Apollo declined to comment. Mails sent to Abhimanyu Munjal, CEO, HeroFinCorp did not generate a response.
ET in its June 25 edition reported the corporation is planning a fund raise and is in talks with PE investors like Apollo.
Hero Fincorp was at first known as Hero Finlease. The business 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 extended in the SME and corporate financing segment. It also obtained a housing finance business licence in 2017.
The business has a current loan book of around Rs 28,000 crore which is between the retail (50%) and SME (30%) corporate loan (20%) segments.
It had a capital adequacy ratio of 19%, well above prescribed regulatory limits, for the financial year ended 2020-21 and this fundraise will strengthen their balance sheet further.
Hero Fincorp posted consolidate revenue of Rs. 4330 crore in the financial year ended 2020-21. It reported net profit of Rs 52 crore in FY21.