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

Hero FinCorp Halts Unsecured Loans to Strengthen Loan Book Ahead of IPO.

Expert Analysis :

• Shift in Lending Strategy: Hero FinCorp has stopped issuing unsecured loans due to rising borrower overleverage. Unsecured lending will now occur only via partners and open markets.

• Balance Sheet Focus: The company aims to focus on secured assets like loans against property, home loans, and vehicle loans, targeting a 14 per cent disbursement growth in FY26.

• Improved Asset Quality: Crisil noted that strengthened credit underwriting and analytics investments helped reduce bad loans from 7.9 per cent in March 2022 to 4.3 per cent in March 2024.

• Rising GNPAs Due to Indebtedness: Due to elevated average indebtedness in the unsecured personal loan segment, overall GNPAs rose to 5.0 per cent by December 2024.

• AUM Exposure and Further GNPA Increase: Unsecured personal loans made up 30 per cent of AUM as of December 31, 2024, and GNPA increased further to 5.5 per cent in March 2025.

• Q1FY26 Growth and Outlook: Hero FinCorp recorded 14 per cent Y-o-Y growth in Q1FY26 and expects steady disbursements, aided by a favourable monsoon and festive season demand.

• Loan Portfolio: Disbursements dropped to ₹30,337 crore in FY25 from ₹32,145 crore in FY24. Outstanding loans stood at ₹49,876 crore as of March 2025.

• Cost of Funds & Rate Environment: 55-60 per cent of liabilities are term loans. While MCLR benefits are limited, 10-15 per cent EBLR-linked loans offer some relief.