CCEA may clear Hero Group's FDI tomorrow

The Union Cabinet is likely to approve tomorrow the induction of Rs 4,500 crore foreign equity by Hero Investments Pvt Ltd (HIPL), mainly to fund the buyout of 26% stake of Japan's Honda in Hero Honda.

According to sources, Cabinet Committee on Economic Affairs (CCEA) is likely to discuss and approve the proposal in a meeting on March 29.

Earlier in February, Foreign Investment Promotion Board had recommended the proposals for consideration by the CCEA as the intended capital infusion exceeded Rs 1,200 crore.

HIPL is one of the main shareholders of the country's largest two-wheeler maker, Hero Honda. It holds 17.33% stake in the company as on December 31, 2010.

In December last year, promoters of HIPL, the B M Munjal family, had agreed to buyout the entire 26% stake of Japan's Honda in Hero Honda and announced to pay Rs 3,841.83 crore for it.

It is understood that the Munjals are looking to raise funds to finance the buyout through stake sale in HIPL to private equity and other foreign funds.

Two private equity firms, BC India Investors II and Lathe Investment Pvt Ltd, will together pick up a 29% stake in HIPL for Rs 3,650 crore.