Hero to unveil new brand identity in July

After announcing separation from former joint venture partner Honda Motor Co. Ltd, Hero Honda Motors Ltd (HHML) will unveil its new brand identity in the second week of July, the company decided at a meeting on Wednesday. 

Around the same time, it will also close the monetary transaction with the Japanese firm.

“Capacity expansion and branding strategy were the two things discussed in the meeting,” a board member present in the meeting said on condition of anonymity. “We have hired a branding expert who is working closely with our team of experts. The new brand identity will be unveiled on 14 July.”

Calls made to the company spokesperson and chief financial officer remained unanswered. An email sent to the company did not elicit any response either.

The new brand identity will not only help the company in venturing into the overseas market but it will also allow the company to source components from alternative vendors.

“As long as the name of Honda exists on the product, component sourcing can be done from the approved vendor list. Once the re-branding under Hero name happens, HHML will be free to scout for alternative vendors, if there is need,” Chirag Shah, a sector analyst with Mumbai-based brokerage firm Emkay Research, wrote in an 8 April report on Hero Honda.

The company has hired London-based branding expert Wolff Olins, as previously reported by Mint, to revamp the brand.

The new strategy is aimed at focusing on the group’s motorcycling pedigree and promoting individual brands such as Passion and Splendour.

In the recent cricket World Cup and in the ongoing Indian Premier League, the company hasn’t mentioned its name in advertisements for the Karizma and the Hunk on billboards or at cricket grounds.

“Honda has a lot of cachet in the Indian market. Hero will, hence, have to do a fair bit of work,” said Arvind Sharma, chairman and chief executive, Leo Burnett India Pvt. Ltd. “From a mass perspective, it’s critical that the new brand communicates that the firm has technology to make a motorcycle that meets international standards.”

He said this will be governed by a series of elements, which includes a new brand identity, new philosophy and models rolled out by Hero.

The Hero Honda board also decided to spend Rs.250 crore on capacity expansion, said the first person cited above. However, a part of the amount will also be utilized for the fourth plant, a decision on which is yet to be taken.

“Production capacity increased through debottlenecking. Current capacity stands at 6.2 million. There is further scope of debottlenecking. The company is aiming for 10% volume growth in FY12,” Shah wrote in his report.

The company has ample scope for expanding capacity at its plants. “We have been gradually ramping up capacity,” said another person familiar with company affairs on condition of anonymity. “A lot of debottlenecking is being done, especially at the Haridwar plant.”

Ajay Shethiya, analyst at brokerage Centrum Broking Pvt. Ltd, expects growth in the two-wheeler industry to taper off and reach the historical levels of 12-13%.

According to him, Hero Honda’s expansion plan is in line with demand and should see it through till the new plant comes up. The company ended the fiscal by selling 5.4 million vehicles as against 4.6 million a year ago.

In a circular issued to the Bombay Stock Exchange on Wednesday, the company declared an interim dividend of Rs.70 per share, causing the stock to surge 5.86% to Rs.1,735.10. The benchmark Sensex rose 2.25% to 19,696.86 points.

While Hero Group has already announced the transaction details of the deal, a formal closure will happen in the third week of July.

On Wednesday, Hero Honda appointed Toshiyuki Inuma non-executive additional director with effect from 13 April. Inuma is also a general manager of Honda’s motorcycle operations in India.

“He is just there to oversee the monetary transaction. He will step down on 19 July,” said the first person cited in the story.