Bringing an end to the 26-year-old partnership between the Hero Group and Honda Motor Corporation (HMC), Hero Honda on Tuesday said the Japanese auto maker has exited the company completely after selling its 26 per cent stake to a group firm of the Indian promoter family.
Under the new structure, the Munjals’ promoted Hero Investment Private Ltd (HIPL) has increased its stake in Hero Honda to 43.33 per cent from the earlier 17.33 per cent (as on December 31,2010). The Indian promoter family would now hold 52.21 per cent stake in Hero Honda.
“Pursuant to a share transfer agreement among the promoters, Honda Motor Corporation of Japan has transferred its entire shareholding/voting rights in the company to Hero Investments Pvt Ltd, forming part of the Indian promoter group of the company,” Hero Honda said in a filing to the Bombay Stock Exchange (BSE).
HMC would now cease to be a promoter in Hero Honda under all applicable securities laws, including the Listing Agreement(s) with the stock exchanges, the company said in the statement. Accordingly, the promoter and promoter group of Hero Honda has been reconstituted.
In December, the Indian promoter of the two-wheeler maker, the B M Munjal family, had agreed to buy out HMC’s 26 per cent stake in Hero Honda for Rs 3,841.83 crore. The company had sought approval from the Foreign Investment Promotion Board and awaited clearance from the Cabinet Committee on Economic Affairs (CCEA) to raise Rs 4,500 crore in foreign direct investment to buy the stake.
Earlier this month, Honda’s two representatives on Hero Honda’s board, Toshiaki Nakagawa and Sumihisa Fukuda, had resigned.
Last month, the CCEA approved the proposal for a Rs 4,500 crore foreign direct investment in HIPL by private equity firm Bain Capital LLC and Lathe Investment, a wholly-owned subsidiary of Government of Singapore Investment Corporation. The Hero Group had earlier stated that the two private equity firms, BC India Investors II, a part of Bain Capital, and Lathe Investment Pvt Ltd, will together pick up a 29 per cent stake in HIPL for Rs 3,650 crore.
In line with a new licensing agreement, signed on January 24 between HMC and the Hero Group, the Japanese company would continue to provide technological knowhow to Hero Honda till 2014 in lieu of royalty.
Hero Honda would now be able to grow business overseas and Honda Motorcycle and Scooter India to scale up operations in India, which was restricted under the joint venture agreement.