Hero MotoCorp, on Monday, approved a proposal to merge the investment arm of its parent — Hero Investment Pvt. Ltd. — into the automaker, 18 months after it announced its split from Honda Motor.
Private-equity funds Bain Capital and the Government of Singapore Investment Corp (GIC), which helped fund the company's buyout of its former partner Honda last year, will take direct stakes in the company after the merger. Separately, Hero announced that it would spend Rs.2,575 crore ($463 million) on two new units that would swell its capacity to over nine million vehicles by September, 2013, from seven million as of now.
“From our perspective, this is the best time to invest, so that when growth comes in, we are prepared for it,'' said Pawan Munjal, Managing Director. The investment would be funded through cash reserves of Rs.4,000 crore, Chief Financial Officer Ravi Sud told reporters.
Hero, which sold over 6.2 million motorcycles and scooters in the fiscal year that ended in March, had a market share of around 55 per cent in the overall domestic two-wheeler market. The Munjal family, Hero's promoters, announced in December, 2010, that they would buy Honda's 26 per cent stake in the automaker, ending a 26-year-old joint venture partnership.
In March, 2011, Bain and the GIC, through wholly-owned Indian units, made investments in Hero Investments, a holding company, which were used to help repay debt from the $851 million purchase of the Japanese company's stake.
After the merger, which is subject to approval from the Delhi High Court and shareholders of the companies involved, Bain and the GIC will own 8.58 per cent and 3.71 per cent, respectively, in the automaker, the company said in a statement. — Reuters
