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Business Standard

Hero FinCorp halts unsecured loans, aims 14% growth in FY26 disbursements

With an eye on making its loan book more robust, IPO-bound Hero FinCorp Ltd (HFCL) has stopped giving unsecured loans due to concerns about borrowers being over-leveraged. It will recalibrate its balance sheet with a focus on secured assets and aims to grow disbursements by 14 per cent in the current financial year (FY26). Abhimanyu Munjal, managing director and chief executive officer, HFCL, told Business Standard that the finance company has made significant changes in business strategy and operations. 'We have stopped unsecured loans. In the unsecured space, we were operating through partners and the open market. Both have been stopped because of the over-leverage issue in the market. The company thought it was better to focus on existing customers and work in loan against property, home loans, and vehicles,' Munjal said. According to CRISIL's analysis, measures such as strengthening credit underwriting and investing in analytics to improve collections in prior years had helped reduce bad loans from 7.9 per cent in March 2022 to 4.3 per cent in March 2024. However, due to challenges like elevated average indebtedness in the unsecured personal loan segment, overall gross non-performing assets (GNPAs) rose to 5.0 per cent by the end of December 2024. The share of unsecured personal loans constituted 30 per cent of assets under management (AUM) as of December 31, 2024, CRISIL said. GNPAs further rose to 5.5 per cent in March 2025, according to HFCL's FY25 annual report. On loan book growth, Munjal said: 'We are seeing muted credit growth in the whole industry. I am fairly certain we should maintain industry or above-industry levels.' He said this year is about re-engineering the balance sheet to make it very robust so that the company can push for growth from the second half of FY26. 'We have so far recorded 14 per cent Y-o-Y growth in Q1FY26. We will maintain a similar level of disbursements. The early indicators of monsoon are positive, and for us, a lot of our vehicle growth comes in the post-monsoon festive season,' he said. The company's disbursements stood at Rs 30,337 crore in FY25, down from Rs 32,145 crore in FY24. Outstanding loans were at Rs 49,876 crore at the end of March 2025, according to its annual report. Asked about the benefits from softening interest rates in raising funds, Munjal said around 55–60 per cent of liabilities are term loans. The marginal cost of funds-based lending rate (MCLR) has not come down dramatically, as the major component of MCLR is deposit cost, which takes time to adjust. 'We have proactively moved to shorter-term MCLRs where we are going to see the benefits,' he added. The external benchmark lending rates (EBLR) on loans have come down, but the share of EBLR-linked loans in bank borrowing is very small — around 10–15 per cent. In that segment, the company has seen a benefit.