S&P cuts Hero FinCorp

S&P said it lowered its long-term issuer credit rating on Hero FinCorp Ltd. to BB from BB+.

“We lowered the rating on Hero FinCorp because we expect the finance company's risk-adjusted capitalization over the next 12-18 months to stay lower than in the past, owing to business expansion,” S&P said in a press release.

However, the agency said it, “Hero Fincorp's profitability is likely to improve over next 12-24 months as high credit costs in recent years taper gradually. The return on assets should average 1.5%-2% over the period compared with a loss in fiscal 2022. The company had two consecutive years (fiscal 2021 and 2022) of high credit costs due to disruptions created by waves of Covid infections in India. The collection efficiency has normalized in the past few quarters since the lockdowns have eased and the economy is recovering.”

The outlook is stable.

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