CCEA to decide on Hero Group's FDI proposal today

The Cabinet Committee on Economic Affairs (CCEA) is likely to take up the issue of allowing the Hero Group to raise Rs 4,500 crore for funding the buyout of its erstwhile partner Honda’s stake, tomorrow.

The group plans to sell stake in its investment arm, Hero Investments (HIPL), to private equity investors B C India Private Investors and Lathe Investment to fund the buyout. While B C India Private Investors is an affiliate of Bain Capital LLC, Lathe Investment is a wholly-owned subsidiary of Government of Singapore Investment Corporation.

The foreign direct investment (FDI) will constitute up to 45 per cent of the equity of Hero Investments, officials said. But the two investors will hold less than 15 per cent in Hero Honda, which will not trigger an open offer.

HIPL is one of the main shareholders of Hero Honda and holds a 17.3 per cent stake. The promoters of HIPL, the

B M Munjal family, had agreed to buy out the entire 26 per cent stake of the Japanese company, Honda, in joint venture Hero Honda for Rs 3,841 crore.

The Munjals are scouting for investors to raise funds to finance the buyout through stake sale in HIPL. The proposal is being taken up by the CCEA, since the Foreign Investment Promotion Board could only consider FDI cases worth up to Rs 1,200 crore.

CCEA may also take up a proposal of global FMCG company Reckitt Benckiser to bring in Rs 3,300 crore for the acquisition of Ahmedabad-based Paras Pharmaceutical. Last year, the UK-based company had agreed to acquire the Indian entity. It will make downstream investment through its subsidiary Reckitt Benckiser (Singapore) Pte.

The committee may consider a fertiliser ministry proposal to buy back bonds issued to fertiliser companies as subsidies, since the companies are not able to sell these bonds in markets, they said. The proposal, if approved, will help fertiliser companies tide over their cash needs.