The International Finance Corporation (IFC), a part of the World Bank Group, has proposed to invest up to $100 million in Indian non-bank financial company Hero FinCorp Limited (HFCL) to help the latter expand its presence in the two-wheeler financing sector.
HFCL is predominantly engaged in the business of providing two-wheeler loans and micro, small and medium enterprises (MSME) loans to clients in low-income states of India.
The investment, which will be in the form of a senior loan, will allow HFCL to expand its two-wheeler financing to self-employed individuals or MSME borrowers in low-income states. The company will also deploy three times the IFC loan amount, through its own resources and other sources of funding, towards the same target beneficiaries over the next 3 years, IFC said in a disclosure.
HFCL is part of the Hero Group of companies in India, which is promoted by the Munjal family. Hero MotorCorp Limited owns 41.2% of HFCL while the Munjal family holds 38.3%. Other investors in the company include Credit Suisse, ChrysCapital and Apis Growth.
Headquartered in New Delhi, HFCL has 3,700 retail touchpoints across 27 states in India. In FY19-20, the company claimed to have covered about 50 lakh customers. It had disbursed Rs17,827 crore of loans in FY19-20, and its total AUM as of March 31, 2020, stands at Rs25,182 crore.
The two-wheeler loan market in India is projected to grow from an estimated $7.2 billion in 2020 to $ 12.3 billion by 2025, exhibiting a CAGR of more than 11% over the next five years, according to a study by TechSci Research. Growth in the market is anticipated on account of growing disposable income, declining fuel prices and increasing ownership of two-wheelers.
Other NBFC players operating in the Indian two-wheeler loan market include Bajaj Finserv, Mahindra & Mahindra Financial Services Limited, and Shriram Transport Finance Co. Ltd.