Hero MotoCorp to merge with Bain, GIC-backed investment arm
Hero MotoCorp, India's largest two-wheeled vehicle manufacturer, approved a proposal to merge the investment arm of its parent company - Hero Investments - into the automaker. Private-equity funds Bain Capital and the Government of Singapore Investment Corp (GIC), who were originally shareholders of Hero Investments, will take direct stakes in the company after the merger.
The merger, which comes 18 months after Hero MotoCorp announced its split from Honda Motor, is still subject to approval from the Delhi High Court, the shareholders and creditors of the respective companies, and other statutory authorities, the company said in a statement.
Bain and GIC will own 8.58% and 3.71% respectively of the merged entity.
Hero's promoters decided to buy Honda's 26% stake in the automaker in December 2010, ending a 26-year-old joint venture partnership. In March last year, Bain and GIC made investments in Hero Investments, which were used to help repay debt taken out for the $851 million purchase of the Japanese company's stake.
Hero announced that it will spend INR25.75 billion ($462 million) on two new factories that would increase its capacity to over 9 million vehicles by September 2013, from 7 million today.
"From our perspective, this is the best time to invest, so that when growth comes in, we are prepared for it," Pawan Munjal, managing director Hero MotoCorp, told Reuters.
Hero sold in excess of 6.2 million motorcycles and scooters in the fiscal year that ended in March. It has a market share of over 50% of the domestic two-wheeler market.
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