Honda, Firodias May Part Ways In Kinetic Venture

Honda Motor Corporation (HMC) and the Firodia family are mulling over various options to put an end to their alliance in Kinetic Honda -- the Pune-based two-wheeler manufacturing company.

The two options being considered include either Honda Motor selling off its 51 per cent equity in Kinetic Honda or else HMC picking up the Firodias' 26 per cent share in the joint venture. A final decision on the modalities of the deal is yet to be taken, reveal Honda Motor sources.

The decision to consider parting ways was taken after the Japanese auto major, which holds majority stake in the joint venture, expressed disappointment over Kinetic Honda's performance during the last one year.

 

Business Standard has already reported the crashing of Kinetic Honda stock price following speculations about HMC walking out of the venture. The trading at the counters have also picked up due to sustained selling pressures, the report had stated.

The partnership between the two companies ran into rough weather following the stringent terms of the joint venture agreement between Honda Motor and the Firodias which require Kinetic Honda to buy the components for its two-wheelers from Kinetic Engineering, a Firodia group company. Besides, Kinetic Engineering also manages the marketing and distribution network for the Kinetic Honda products.

Since the supply of components as well as marketing and distribution of products are being handled by the Firodias, the Japanese major is said to be unhappy since it is unable to involve itself directly in the operations of the company in spite of being a majority equity holder.

Business Standard was unable to contact Arun Firodia, director, Kinetic Honda, for his comments on the issue. However, in an earlier interview, he had said: "We are happy working with Honda. We would not like to feed speculation going in the stock market based on the prices of the share."

According to sources close to Honda, the performance of Kinetic Honda has been a sore point with the Japanese company, especially when Hero Honda -- its other two-wheeler manufacturing joint venture company with the Munjals, has been faring well. In fact, Kinetic Honda has not grown during the last one year, they point out.

The stock markets are already abuzz with speculations about Honda Motor pulling out of Kinetic Honda which has led to a stock price crash of Kinetic Honda and the scrip has suffered sustained selling pressure during the last few days. Trading volumes, too, have picked up sharply in this thinly-traded counter.

On Thursday, 19,000 shares were traded on the National Stock Exchange (NSE), which is much higher than the average daily volume of 2,500-3,000 shares. The stock price crashed to close at Rs 56.40 on the bourse.