Hero FinCorp Struggles in FY25 with Poor Profitability and Rising NPAs

07 May 2025

Financial Performance (Q4FY25 vs Q4FY24): In Q4FY25, Hero FinCorp reported a 10.5% YoY increase in total income to ₹2,518 Cr, up from ₹2,280 Cr in Q4FY24, driven primarily by higher revenue from operations. However, profitability deteriorated sharply, with Profit Before Tax (PBT) falling 63.0% to ₹81 Cr from ₹219 Cr, indicating significantly reduced operational leverage. Profit After Tax (PAT) dropped 69.7% to ₹41 Cr from ₹135 Cr, mainly due to increased finance costs and higher impairment charges on financial instruments. Correspondingly, Earnings Per Share (EPS) declined to ₹3.2 from ₹10.6.

Financial Performance (FY25 vs FY24): Hero FinCorp posted a strong 18.5% YoY growth in total income to ₹9,903 Cr in FY25, up from ₹8,360 Cr, supported by rising interest income, gains on financial instruments, and other fee-based revenues. However, this revenue growth did not translate into profitability. PBT declined sharply by 73.3% to ₹256 Cr from ₹961 Cr, largely due to higher borrowing costs and elevated credit provisions. As a result, PAT contracted 82.7% to ₹110 Cr, compared to ₹637 Cr in FY24. EPS stood at ₹8.6, significantly lower than ₹50.0 in the previous year, reflecting a steep erosion in bottom-line performance.

Operational Metrics (FY25 vs FY24): The net profit margin dropped to 4.5% in FY25, from 11.8% in FY24, underscoring cost and efficiency pressures. Gross NPA (GNPA) rose to 5.05% from 4.35%, indicating worsening asset quality. Similarly, Net NPA increased to 2.30% from 2.07%, raising asset quality concerns. The Provision Coverage Ratio (PCR) remained healthy at 55.8%, offering a cushion against potential stress. The loan book grew by 7.9% to ₹53,815 Cr, up from ₹49,880 Cr, reflecting moderate growth in disbursements. Total assets increased 12.9% YoY to ₹60,042 Cr, while total equity marginally declined to ₹5,761 Cr from ₹5,772 Cr, owing to lower retained earnings.

Strategic Developments: FY25 proved to be a challenging year for Hero FinCorp. Although the company grew its total assets and loan book, it struggled to keep profits and loan quality strong. Higher borrowing costs and more money set aside for bad loans reduced overall profits. The increase in bad loans (NPAs) shows that the company may need to improve how it checks borrowers and recovers dues. Still, Hero FinCorp continued to set aside enough funds to cover potential loan losses and kept its lending growth steady. Going forward, the company will likely need to focus more on cutting costs, managing risks better, and improving loan repayments.