For Licensing, Hero Honda To Pay 45 Bn Yen To Honda Till 2014

By By: Vicky.in

Published: Monday, May 2, 2011, 14:15 [IST]

Hero Honda, India's largest two wheeler maker will pay Honda 45 billion yen (about Rs 2,450 crore) till 2014 for the new licensing agreement signed between the Hero Group and the Japanese auto major after their joint venture got dropped.

The amount is aligned with its existing rate of royalty payment that is about 2.7 per cent to 2.8 per cent of net sales. The Indian group will stop paying royalty by June, 2014 for the existing products, said Hero Honda Motors Ltd (HHML).

Honda Motor Co said that Honda and HHML have signed a new licensing agreement that enables HHML to continue producing, selling and servicing its current products. And the consideration for the licensing agreement was JPY 45,000 million and becomes due through 2014.

The Hero Group and Honda had agreed to end their 26-year-old relationship in December 2010 with the Indian partner agreeing to buy out Honda's 26 per cent stake in Hero Honda for Rs 3,841.83 crore.

HHML Chief Financial Officer Ravi Sud said that the amount to be paid to Honda till June, 2014, does not echo any increase in royalty payment. At around 2.7 per cent to 2.8 per cent of net sales, Hero Honda has been paying royalty to Honda and it will remain the same even in future.

By 2014, the royalty payment will gradually taper off from about 2.75 per cent now to 2.2 per cent and after that for the existing products, the Hero group will not pay any royalty for the existing products.

Sud added that even for new products that we may get from Honda after June, 2014, the royalty will be in line with what we are paying today.