Hero promoters to sell stake worth $300 mn

3.3% share sold for Rs 1,860 cr; promoters eyeing entry in real estate, power, defence

The Munjal family, promoters of the world’s largest two-wheeler maker Hero MotoCorp, on Wednesday sold 3.3 per cent of their stake, worth $300 million (Rs 1,860 crore), in the company to help them diversify into new businesses such as defence,  real estate and power. The promoters now have about 36 per cent stake in the company.

In a statement, the family said, “The group will use the sale proceeds to fund new growth avenues available through the government’s ‘Make in India’ initiative. The prime minister’s ‘Make in India’ platform has opened up new vistas, some in very high growth areas, and the Hero Group — with its experience, scale of operations and brand equity — is uniquely placed to leverage these emerging opportunities.” The statement added the group remained “strongly committed” to its core two-wheeler business, where it saw enormous potential, both in India and abroad.

The family sold seven million shares in block deals at a three to five per cent discount to Monday’s share price. Subsequently, Hero’s shares fell five per cent from its previous close to Rs 2,663 apiece on the BSE exchange on Wednesday. According to the term sheet, the promoters offered shares at Rs 2,664-2,720 apiece.

Before the sale, the Munjals held about 39 per cent in the company, worth Rs 21,300 crore. The total market capitalisation of Hero MotoCorp is Rs 53,185 crore.

“With a new generation taking over, the young entrepreneurs want to do something different — even if it means a loss. The Munjals are planning to get into new businesses like defence in a big way. We are expecting an announcement soon,” said a Mumbai banker.  

A source said the Munjals were also keen to take a stake in defence and cargo ship maker Pipavav Defence, talks for which were still on.

Bankers said many successful Indian promoters were making investments in new, unrelated areas, encouraged by the pro-business Modi government at the Centre. Last week, Sun Pharmaceutical’s promoter Dilip Shanghvi invested Rs 1,800 crore in his own capacity in struggling wind-turbine maker Suzlon. With this, Shanghvi owns 23 per cent in Suzlon, a percentage lower than the founder Tanti family.  Wipro Chairman Azim Premji has set up a private equity fund, PremjiInvest, that is investing in an assortment of companies, including new-generation ones and in real estate.

After breaking up with Japan’s Honda in 2010, Hero MotoCorp’s share price has almost doubled. “This shows the faith investors have put in the Indian promoters [the Munjals],” a banker said.