Event Date: N/A
Resonate Valutech LLP, a registered valuer entity, provides an opinion on the fair value of equity shares of Hero Fincorp Limited ("the Company") as of December 31, 2024, for the purpose of issuing equity shares under Section 62(1)(c) of the Companies Act, 2013. The fair value of per Equity Share is determined to be Rs. 1,400 (Rupees One Thousand Four Hundred only) based on the Discounted Cash Flow (DCF) Method. The report is confidential and intended for the use of the Board of Directors, audit committee, auditors, and regulatory bodies of the company.
The valuation exercise analyzed and relied on consolidated unaudited financial statements for the period ended 31/12/2024, consolidated audited financial statements for the year ended 31/03/2024, consolidated yearly projected financial statements up to the year ended 31/03/2029, and other relevant data and information provided by the management of PCMCIPL. Resonate Valutech LLP, with IBBI registration number IBBI/RV-E/06/2024/209, has designated partners Naveen Singal and Vipan Kumar. Naveen Singal performed this valuation assignment. There is no valuer interest or conflict disclosed.
The report is subject to certain caveats, limitations, and disclaimers, including that it is to be read in totality, not in parts, and in conjunction with relevant documents. It is based on financial, economic, and market conditions as of the valuation date, and Resonate Valutech LLP does not take responsibility to update, revise, or reaffirm the report for future events.
Hero FinCorp Limited, a public company domiciled in India, is registered as a Non-Banking Financial (Non deposit accepting) Company engaged in financing, leasing, bill discounting, and related financial services. The authorized share capital as on 31/12/2024 is Rs. 300 crores, consisting of 30,00,00,020 equity shares of Rs. 10 each. The issued and paid-up capital as on 31/12/2024 is Rs. 127.41 crores, consisting of 12,74,12,759 equity shares of Rs. 10 each. Key equity shareholders include Hero Motocorp Limited (41.15%), Bahadhur Chand Investments Private Limited (20.22%), Brijmohan Lal OM Prakash - Partnership Firm (9.51%), and Otter Limited (10.11%). As of 31/12/2024, diluted equity shares were 12,98,00,538 including outstanding ESOPs.
A summary of the unaudited profit and loss statement for the period ended 31/01/2025 and the audited profit and loss statement for the year ended 31/03/2024 are provided. For 31-12-2024, total revenue was INR 7,385.15 Crs and profit before tax was INR 175.05 Crs.
The report adopts ICAI Valuation Standards, including ICAI VS 101, 102, 103, 201, 202, 301, and 303, along with IVS issued by IVSC. The premise of value is on an "as is where is" and going concern basis.
The procedures adopted in carrying out the valuation included receipt of proposal, discussions with management, requisition and receipt of information, review and analysis of information, determining valuation approach, valuation synthesis, and report preparation.
The valuation approach considered Cost, Market, and Income approaches. The Market approach was further defined by Market Price Method (MP), Comparable Companies Multiples (CCM) and Comparable Transactions Multiples (CTM) Method. Due to limited public information, CTM Method was not used. The Cost approach was not applied as there is no intention to liquidate the company. The DCF method, under the Income Approach, was used along with CCM.
The DCF method employs Free Cash Flows to Firm (FCFF) and Free Cash Flows to Equity (FCFE). The discount rate reflects the time value of money and risk, with FCFF using the weighted average cost of capital and FCFE using the cost of equity. The cost of equity (Ke) is calculated using the Capital Asset Pricing Model (CAPM): Ke = Rf + (Rm - Rf)*B + CSRP, where Rf is the risk-free rate of return (6.76% reduced by 2.18% country default spread), Rm is the return on diversified market portfolio, B is the systematic risk factor (Beta of 1.10 for NBFC), and CSRP is the Company Specific Risk Premium (1.50%).
Terminal value is estimated using a P/B multiple of 2.31 of comparable companies.
Key assumptions for the DCF valuation include an income tax rate of 25.168% and cash flows discounted on a mid-year basis. The valuation combined income approach (65%) and CCM (35%), leading to a fair value per equity share of INR 1,400.
Annexure 1 details the Comparable Companies Multiple analysis and Annexure 2 presents the data used for Cost of Capital calculation.
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