Hero FinCorp puts Rs 258-crore stressed unsecured loan pool on the block, seeks 95% haircut

Hero FinCorp Ltd, the non-banking finance arm of the Hero Group, has invited asset reconstruction companies (ARCs) to bid for a portfolio of 39,446 stressed unsecured loans carrying an aggregate principal outstanding of Rs 257.88 crore, according to a public notice published in Financial Express on September 25.

The company has set a reserve price of Rs 12.25 crore for the pool, based on a binding offer already in hand. That means Hero FinCorp is willing to accept about 4.75% of the outstanding principal, a haircut of roughly 95% or around Rs 245.63 crore.

The sale will be conducted under the Swiss Challenge method, in which an existing anchor offer is thrown open to counter bids. Rival ARCs must bid at least Rs 12.86 crore, a 5% mark-up over the anchor offer, and the original offeror will have the right to match the highest counter bid. Counter bids will be evaluated on price and “other factors” under the lender’s evaluation matrix, the notice said, without spelling out those factors.

The consideration will be paid in cash plus security receipts (SRs). The notice does not specify the split between the two. A higher SR component would mean Hero FinCorp retains a larger share of the recovery risk on the portfolio.

The average principal outstanding works out to about Rs 65,400 per account, consistent with a book of small-ticket retail or personal loans. The notice does not disclose the product type, vintage or how long the accounts have been in default.

Interested ARCs must submit binding bids by 12 noon on September 29. Account-level details will be shared only after bidders sign a non-disclosure agreement and submit an expression of interest, after which they can carry out due diligence at their own cost. The loans will be sold on an “as is, where is” and “as is, what is” basis, without recourse to Hero FinCorp.

The lender has reserved the right to sell the assets as a whole or in part, in one or more pools, to add or withdraw accounts, and to terminate the process at any stage without giving reasons. It said the sale will comply with RBI and other regulatory requirements.

Shrinking unsecured book

The sale comes as Hero FinCorp cuts back on unsecured lending. The annual report describes an “intentional rundown of the unsecured portfolio” during FY26. Unsecured loans on the standalone book fell to Rs 21,644.44 crore as of March 31, 2026, from Rs 22,562.53 crore a year earlier. The company’s total exposure to personal loans shrank about 13.5%, to Rs 14,158.84 crore from Rs 16,362.12 crore.

Personal loans remain the weakest part of the book. Gross NPAs in the segment stood at 6.55% of exposure, compared with 7.55% a year earlier, higher than any other segment the company reports.

Overall asset quality improved. Standalone gross NPAs fell to Rs 2,091.24 crore, or 4.2%, from Rs 2,720.74 crore, or 5.5%. Net NPAs to net advances eased to 1.79% from 2.43%.

Much of that improvement came from write-offs. Settlement losses and bad debts written off rose about 30% to Rs 2,970.12 crore in FY26, from Rs 2,276.79 crore. The contractual amount of written-off assets still under enforcement stood at Rs 3,163.70 crore.

Loss-making year, IPO window closing

Hero FinCorp reported a standalone net loss of Rs 306.56 crore for FY26, against a profit of Rs 57.84 crore a year earlier. Its consolidated net loss was Rs 226.01 crore. The company attributes the reported loss mainly to its accounting for compulsorily convertible preference shares (CCPS), which it carries as a liability at fair value. Treating them as equity would have produced a standalone profit of Rs 230.65 crore, according to the company. It said that on an adjusted basis its return on equity was 2.6% and its return on assets was 0.5%.

Standalone assets under management grew 1% to Rs 51,248 crore. The company’s capital adequacy ratio stood at 16.80% as of March 31, 2026, above the regulatory minimum of 15%.

The loan sale also comes as the company’s IPO approval nears expiry. Hero FinCorp filed its draft red herring prospectus with SEBI on August 1, 2024, and received SEBI’s observations on May 21, 2025. Under a one-time SEBI relaxation announced on April 7, 2026, observation letters expiring between April 1 and September 30, 2026 were extended to September 30, 2026. The annual report states that Hero FinCorp is “taking all necessary steps” to complete the proposed IPO in a timely manner.

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