The Hero Group on Thursday announced that it would buyout the entire 26
per cent stake of its partner Honda Motor Company Group in Hero Honda,
India's No.1 bike manufacturer, thus breaking its 26-year-old
partnership with the Japanese auto major.
Without disclosing the size of the deal, a company release said: “The
decision to restructure the equity has been reached in a cordial and
amicable manner…As per the MoU, Hero Group will buy the entire 26 per
cent equity stake of Honda Motor in Hero Honda Motors Ltd (HHML) in a
phased manner from two or more qualified promoters. Upon completion of
the transaction, Hero Group will be the sole promoters of the company.”
It was in 1984 that the Hero Group joined hands with Honda Motor Co. to
become not only India's but also world's largest two-wheeler
manufacturer.
In 2009-10, Hero Honda had sold 46-lakh two-wheelers, capturing 48 per
cent of the Indian two-wheeler market, which is the second biggest in
the world after China.
“This is the most important announcement I have made in the last 25
years... The board has approved an MoU between Hero Honda and Honda. The
two companies will sign a definitive agreement within the next few
weeks. Now, with this new arrangement, we are set to charter new
segments and geographies and develop new products. This marks the
beginning of a revitalised journey of growth for the company and its
people and business associates,” HHML Managing Director and CEO Pawan
Munjal told journalists here.
Hero Honda will continue to produce and sell the existing models, while
new models would be also launched. However, all future products will be
rolled out under the new licensing agreement between Hero Group and
Honda. Hero Honda brand name will also be changed over time.
Commenting on the deal, Honda Managing Director and COO, Regional
Operations (Asia and Oceania), Fumihiko Ike said: “In order to assure
service to the customers, Honda will grant the necessary licence to
enable continued production and sales of current products as well as
licence for new products.” Declining to share the deal value, Mr. Munjal
said: “Royalty (to Honda) will remain in line or even lower...it is
incorrect that royalty will go up to 8 per cent.” The royalty paid in
2009-10 on an average stood at 2.3 per cent to 3 per cent of sales.
The new licensing arrangement signed between the Hero Group and Honda
Motor Co., Japan, would also enable higher growth by giving it (Hero
Group) the freedom to develop its own research and development
capabilities and exploit global export and manufacturing opportunities.
The two-wheeler major will also start exporting products across the globe and look for manufacturing opportunities.
“Hero Honda can go out and can make its presence felt globally,” Mr.
Munjal said, adding that the company could now establish distribution
networks across the globe.
src: TH