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Hero Honda Split Not Ok With Investors
Sources in the industry claim that Hero Motors is on the plans to sell the 26% Honda shares to a private equity investors at a price much below the current market price. An unusual lobby has been created by a group of investors in Hero Honda to thwart any such inferior business deal. The investors expressed their reservations over Hero Motors taking steps to sell the shares at a lower price and also the increased royalty amount marked for Honda. By means of royalty, Honda would receive amount for exchange of technology thought the JV is all set to split. Currently Hero Honda Motors is paying a royalty of 2.5% which is likely may go to5%- 8%, fear the investors who may lose earnings.
Among the chief investors in the Hero Honda Motors are Aberdeen Asset Management with 5.14% shares to be largest institutional shareholder; Vanguard, LIC of India and Capital World have their say worth 1-2% in the JV. In addition there is a mutual fund promoter which has a strong stake in Hero Honda Motors said it is totally against the reduced share sell and so far no investors have approached it. The company said if needed the firm will also enter into the protest moves.
The split up between the 25 year long relation of Hero and Honda is getting the last phases, breaking the 10 year contract valid till 2014. Neither of the companies disclosed any official statements regarding the depart, since no response came to any sort of enquiry by press persons. It was assumed from the sources that Hero will buy the shares from Honda and sell publicly. As per the agreed norms between the partners, any one of them can avail buying of the shares at a price less by 33% than the market price.
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