The Munjal family-promoted Hero group is likely to purchase the entire stake of Honda Motor Co in their joint venture Hero Honda Motors Ltd through a special purpose vehicle incorporated in Singapore.
The group is also in talks with three international funds to offload a part of its stake in the special purpose vehicle, a source said.
According to the plan, the Munjals will buy the complete 26% stake owned by Tokyo-based Honda Motor for $1.2 billion, a discount to the current market value of $2 billion, and park it in the family-owned Singapore SPV.
“In order to raise money for the deal, they would offload
49% stake in the SPV to the three global funds,” the source said.
The three funds would be offered the 49% stake for around $600 million, which would constitute half the value of the Honda stake. The rest would be infused by the Munjals by way of debt or other routes.
The source said Hero Honda might make an announcement about the deal as early as end of September.
An analyst with a leading international brokerage firm said at $1.2 billion, a 26% stake is at much discount and brings the valuation of Hero Honda at around Rs22,000 crore, down from Rs35,000 crore.
“A discount to the Honda stake is reasonable as once Honda walks away, the Hero group will have no technology. Also, because the company doesn’t do its own R&D, the value of the company automatically comes down,” he said.
There is no clarity so far as to where the company will source technology from beyond 2014, when its technology sharing contract with Honda expires.
But this won’t quite leave Hero Honda impaired, the analyst said. “India is not a technology-driven market, instead it is a price-driven market and with an entire gamut of products that Hero Honda has currently and a strong domestic demand, it is not going to be a tough road ahead for the company.”
Also, Hero Honda can use time till 2014 to develop its own R&D or purchase it from other companies, the analyst said.
In a recently released report on the domestic two-wheeler industry, CARE Research estimates domestic two-wheeler demand to maintain the strong growth momentum this fiscal, registering a growth of 19.4%. The industry has witnessed 27% year-on-year growth in domestic sales during April-August 2010 period.
The growth will be spearheaded mainly by Hero Honda, which has witnessed a healthy growth of 24% so far this year, analysts said.
NEW BIKES ON THE WAY FROM MAHINDRA 2 WHEELERS
Company planning an aggressive marketing campaign to go with its new offerings
Mahindra 2 wheelers has had our attention on a number of occasions in the recent past - first after it acquired Kinetic Engineering and then bought out Italian design firm Engines Engineering. After warming the market up with its scooters though, the company is on the verge of tapping into the pulse of commuters and enthusiasts alike with its new offerings, which should be on their way by the end of September.
Two new motorcycles are on the anvil for the bike maker - one of them is expected to be a commuter motorcycle in the 100-125cc band for volume sales. The other is expected to be a more exuberant and performance oriented bike which could lie in the 250-300cc band.
The new firm is not stopping at the launches. It has also announced a new endeavor to reach out to the biking community across the country by launching its ‘India’s Best Job’ campaign, in which 20 motorcyclists will be selected from around the country to ride for six weeks into different parts of the country on an all-expense paid ride. Apart from getting a stipend for the duration of their journey, riders will also get to take home their Mahindra steeds when the ride ends.
This marks one of the most aggressive marketing campaigns in recent times for the Indian motorcycle industry. It sure looks like Mahindra wishes to leave no stone unturned when it comes to its first bikes in the market. Stay logged on to www.zigwheels.com to get news on the bikes as it breaks!
Mahindra 2 wheelers has had our attention on a number of occasions in the recent past - first after it acquired Kinetic Engineering and then bought out Italian design firm Engines Engineering. After warming the market up with its scooters though, the company is on the verge of tapping into the pulse of commuters and enthusiasts alike with its new offerings, which should be on their way by the end of September.
Two new motorcycles are on the anvil for the bike maker - one of them is expected to be a commuter motorcycle in the 100-125cc band for volume sales. The other is expected to be a more exuberant and performance oriented bike which could lie in the 250-300cc band.
The new firm is not stopping at the launches. It has also announced a new endeavor to reach out to the biking community across the country by launching its ‘India’s Best Job’ campaign, in which 20 motorcyclists will be selected from around the country to ride for six weeks into different parts of the country on an all-expense paid ride. Apart from getting a stipend for the duration of their journey, riders will also get to take home their Mahindra steeds when the ride ends.
This marks one of the most aggressive marketing campaigns in recent times for the Indian motorcycle industry. It sure looks like Mahindra wishes to leave no stone unturned when it comes to its first bikes in the market. Stay logged on to www.zigwheels.com to get news on the bikes as it breaks!
Home, auto loans to pinch
Come October, consumers will pay more on home and auto loans as bankers are expected to up lending by anywhere between 25 and 50 basis points. One basis point is equal to one hundredth of a percentage. This follows the Reserve Bank of India’s (RBI) move on Tuesday to hike its key policy rates — repo rate (the rate at which it lends to commercial banks) by 25 basis points (bps) to 6% and reverse repo rate (the rate at which banks park excess cash with RBI) by 50 bps to 5%. Banks are also expected to increase deposit rates since the growth rate of deposits has been rather sluggish at just about 14%.
“RBI move clearly signals an upward bias on interest rates. We will decide on a possible revision in rates in our asset and liability committee (ALCO) meeting,'' said SS Ranjan, chief financial officer, State Bank of India, adding, “The quantum of the rate hike will depend on how the cost of funds and demand for credit pans out.''
MV Nair, chairman and managing director, Union Bank of India, said, “We expect credit demand to pick up in October as the busy season kicks in and there will be pressure on liquidity which will lead to rise in interest rates. We will review our base rate and benchmark prime lending rate in October.''
Dipak Gupta, executive director, Kotak Mahindra Bank, added, “Interest rates will move up and we may increase our interest rates both deposits and lending to 25 basis points.''
Ashish Parthasarthy, head (treasury), HDFC Bank, said, “There is every possibility that base rate will be revised to the extent of 25-50 basis points.'' There would be another round of deposit rate hikes of 25 basis points across the board but not immediately.”
However, Keki Mistry, vice-chairman & CEO, HDFC, does not see any significant impact on long term rates following the 25 bps increase in rates. “Immediately there will be no increase in rates as the market had factored in a 25 basis point hike in repo rate. I expect RBI to now take a pause as inflation is easing,'' said Mistry.
The housing finance company — which has been facing stiff competition from public sector banks like State Bank of India —has introduced a dual rate home loan product. The scheme bears a fixed interest rate of 8.50% per annum up to March
“RBI move clearly signals an upward bias on interest rates. We will decide on a possible revision in rates in our asset and liability committee (ALCO) meeting,'' said SS Ranjan, chief financial officer, State Bank of India, adding, “The quantum of the rate hike will depend on how the cost of funds and demand for credit pans out.''
MV Nair, chairman and managing director, Union Bank of India, said, “We expect credit demand to pick up in October as the busy season kicks in and there will be pressure on liquidity which will lead to rise in interest rates. We will review our base rate and benchmark prime lending rate in October.''
Dipak Gupta, executive director, Kotak Mahindra Bank, added, “Interest rates will move up and we may increase our interest rates both deposits and lending to 25 basis points.''
Ashish Parthasarthy, head (treasury), HDFC Bank, said, “There is every possibility that base rate will be revised to the extent of 25-50 basis points.'' There would be another round of deposit rate hikes of 25 basis points across the board but not immediately.”
However, Keki Mistry, vice-chairman & CEO, HDFC, does not see any significant impact on long term rates following the 25 bps increase in rates. “Immediately there will be no increase in rates as the market had factored in a 25 basis point hike in repo rate. I expect RBI to now take a pause as inflation is easing,'' said Mistry.
The housing finance company — which has been facing stiff competition from public sector banks like State Bank of India —has introduced a dual rate home loan product. The scheme bears a fixed interest rate of 8.50% per annum up to March
Fresh demand to spur two-wheeler growth
NEW DELHI: Automakers are scaling up production capacity to meet the demand spurt during the upcoming festival season with some companies being forced to assemble parts manually having failed to set up a conventional automatic production line in time.
Although vehicle makers face demand spurt during the October-November period that coincides with various religious festivals across the country every year, this season is specially challenging as automakers have already been struggling to meet consumer demand that has bucked industry projections.
The country’s largest carmaker Maruti Suzuki has put together a temporary production line, its first to be operated manually. “After exhausting all means to increase production, we have put up this temporary line at Gurgaon plant where cars are not being assembled on the conveyer belt, rather we use push-carts to move the assembly of cars to meet the festive demand,” said RC Bhargava, chairman, Maruti Suzuki.
The festive season demand sets in with the beginning of Navratras in October and stretches up to mid-November for Diwali. Sales increases as most customers consider buying metal products auspicious during this period.
Other vehicle makers are also ramping up their manufacturing capabilities. Toyota Kirloskar Motor has advanced expansion at its first plant that produces the Innova, Corolla and Fortuner vehicles. Earlier, the expansion was expected to begin in January 2011. “The expansion of the plant in October-November would gear up to take the production to 80,000 units per year that would help us tide over the current shortages and also meet the extra festive demand,” said Sundeep Singh deputy MD (marketing), Toyota Kirloskar Motor.
Auto companies usually start building inventories 2-3 months prior to the festive season, but consistent high demand in the past few months has wiped out planned inventories.
Domestic automobile sales have been on a record breaking spree this fiscal with the industry clocking 12.63 lakh units in August, the highest ever achieved in a month and a tad higher than the previous best of 12.37 lakh units clocked in July.
South Korean car maker Hyundai Motor India has shifted bulk of its production to domestic market from exports, while Volkswagen India has started a second shift at its Chakan plant a few days back.
Two-wheeler makers are also gearing up to meet the demand. Hero Honda, which is scouting for a location for its fourth plant, is planning to increase production from its Haridwar plant. “While we have maximised production at all our plant, the Haridwar plant would be tweaked to manufacture more during the festive season as we aim to clock 5-lakh retail sales next month,” a Hero Honda spokesman said.
It’s not just automakers who are burning the midnight oil to build up inventories. The component makers also trying to meet the demand pressures from automakers. “We would be working on all seven days a week. We have built up capacities, but the challenge is to ensure raw material supplies to meet a robust festive demand,” said Surinder Kapur, chairman of Delhi-based Sona Group.
Some component makers are outsourcing production to tier II and tier III suppliers to cope with the increasing demand. The Automotive Component Manufacturers Association of India (ACMA) said, that some of the capacity expansion in progress would come as a breather for manufacturers during the peak festive season. “As sales has been consistently high for past few months, we are not expecting much spike in festive demand. But the new capacities would help us tide over the temporary hike in demand,” said Srivats Ram, president of ACMA.
Although vehicle makers face demand spurt during the October-November period that coincides with various religious festivals across the country every year, this season is specially challenging as automakers have already been struggling to meet consumer demand that has bucked industry projections.
The country’s largest carmaker Maruti Suzuki has put together a temporary production line, its first to be operated manually. “After exhausting all means to increase production, we have put up this temporary line at Gurgaon plant where cars are not being assembled on the conveyer belt, rather we use push-carts to move the assembly of cars to meet the festive demand,” said RC Bhargava, chairman, Maruti Suzuki.
The festive season demand sets in with the beginning of Navratras in October and stretches up to mid-November for Diwali. Sales increases as most customers consider buying metal products auspicious during this period.
Other vehicle makers are also ramping up their manufacturing capabilities. Toyota Kirloskar Motor has advanced expansion at its first plant that produces the Innova, Corolla and Fortuner vehicles. Earlier, the expansion was expected to begin in January 2011. “The expansion of the plant in October-November would gear up to take the production to 80,000 units per year that would help us tide over the current shortages and also meet the extra festive demand,” said Sundeep Singh deputy MD (marketing), Toyota Kirloskar Motor.
Auto companies usually start building inventories 2-3 months prior to the festive season, but consistent high demand in the past few months has wiped out planned inventories.
Domestic automobile sales have been on a record breaking spree this fiscal with the industry clocking 12.63 lakh units in August, the highest ever achieved in a month and a tad higher than the previous best of 12.37 lakh units clocked in July.
South Korean car maker Hyundai Motor India has shifted bulk of its production to domestic market from exports, while Volkswagen India has started a second shift at its Chakan plant a few days back.
Two-wheeler makers are also gearing up to meet the demand. Hero Honda, which is scouting for a location for its fourth plant, is planning to increase production from its Haridwar plant. “While we have maximised production at all our plant, the Haridwar plant would be tweaked to manufacture more during the festive season as we aim to clock 5-lakh retail sales next month,” a Hero Honda spokesman said.
It’s not just automakers who are burning the midnight oil to build up inventories. The component makers also trying to meet the demand pressures from automakers. “We would be working on all seven days a week. We have built up capacities, but the challenge is to ensure raw material supplies to meet a robust festive demand,” said Surinder Kapur, chairman of Delhi-based Sona Group.
Some component makers are outsourcing production to tier II and tier III suppliers to cope with the increasing demand. The Automotive Component Manufacturers Association of India (ACMA) said, that some of the capacity expansion in progress would come as a breather for manufacturers during the peak festive season. “As sales has been consistently high for past few months, we are not expecting much spike in festive demand. But the new capacities would help us tide over the temporary hike in demand,” said Srivats Ram, president of ACMA.
Honda to keep Tech support for Hero even after JV exit
The Hero Group and Honda Motor of Japan have reached an understanding on how their separation would be scripted. As per the plan, Honda would divest its 26% stake in the joint venture firm Hero Honda and dissociate itself from brand Hero. Honda would, however, continue to provide technology support to the Indian firm even after 2014, when their extant pact comes up for review.
Honda Motors would exit the JV by divesting its stake either in favour of Hero Group or private equity players, sources in the know said.
This would mean that once the divorce is formalised, the Hero Group could still source technology from Honda but its motorcycles like Splendour and Passion among others would no longer sport the Honda brand. The Hero Group would continue to pay a royalty to Honda for the technology tie-up.
FE was the first to report in its edition dated August 3 that the two firms had run into differences ahead of the renewal of the technology agreement, which comes up in 2014.
Honda Motors would exit the JV by divesting its stake either in favour of Hero Group or private equity players, sources in the know said.
This would mean that once the divorce is formalised, the Hero Group could still source technology from Honda but its motorcycles like Splendour and Passion among others would no longer sport the Honda brand. The Hero Group would continue to pay a royalty to Honda for the technology tie-up.
FE was the first to report in its edition dated August 3 that the two firms had run into differences ahead of the renewal of the technology agreement, which comes up in 2014.
Yamaha flags off the SZ Tour
India Yamaha Motor reveals that the ‘Yamaha SZ Tour – Stay Ahead’ has already commenced and is slated to last for a duration of one month. The riders geared up to rule the road with Yamaha’s all new SZ as they set out to conquer 67 cities in 17 states strewn across the country.
The rally will extend across various states such as Uttar Pradesh, Delhi, Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Orissa, Goa, West Bengal, Chattisgarh, Tamil Nadu, Jharkhand, Andhra Pradesh and Karnataka. The bikers will traverse though these plains over a span of 30 days. There are two teams taking part in the rally, each comprising of ten members that flagged off from the nation’s capital Delhi.
The rally will extend across various states such as Uttar Pradesh, Delhi, Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Orissa, Goa, West Bengal, Chattisgarh, Tamil Nadu, Jharkhand, Andhra Pradesh and Karnataka. The bikers will traverse though these plains over a span of 30 days. There are two teams taking part in the rally, each comprising of ten members that flagged off from the nation’s capital Delhi.
India Yamaha Motor to revamp product portfolio
India Yamaha Motor (IYM) plans to revamp its product portfolio by 2013,said a senior company official.
"We would be introducing new bikes and also foray into the scooter segment, said IYM CEO and MD Yukimine Tsuji.We are aiming a 10% market share in domestic two-wheeler market,which we aim to achieve by an allnew combined portfolio of bikes and scooters in the coming years."The Indian subsidiary of the worlds second-largest twowheeler company has been looking for a turnaround after Japanese Mitsui & Co picked up a 30% stake for Rs 800 crore in 2008.Yamaha India has an installed capacity of 6-lakh units per year,and is looking at producing 3.8 lakh bikes this fiscal,with around 1.5 lakh targeted for exports.Yamaha is also customising scooters from its international portfolio for the Indian market."We are working on different segment of scooters for India,"Mr Tsuji said.
"We would be introducing new bikes and also foray into the scooter segment, said IYM CEO and MD Yukimine Tsuji.We are aiming a 10% market share in domestic two-wheeler market,which we aim to achieve by an allnew combined portfolio of bikes and scooters in the coming years."The Indian subsidiary of the worlds second-largest twowheeler company has been looking for a turnaround after Japanese Mitsui & Co picked up a 30% stake for Rs 800 crore in 2008.Yamaha India has an installed capacity of 6-lakh units per year,and is looking at producing 3.8 lakh bikes this fiscal,with around 1.5 lakh targeted for exports.Yamaha is also customising scooters from its international portfolio for the Indian market."We are working on different segment of scooters for India,"Mr Tsuji said.