The other question is of what happens to the sales various
Munjal investment firms had lined up with private equity players. The Munjals had applied to the FIPB to sell 45% of their stake in investment firm Hero Investment Pvt Ltdsince HIPL owns 17.33% of Hero Honda, effectively 7.8% of Hero Hondas shares are to be sold to PE players (another 8.67% of Hero Honda is owned by group investment firm Bahadur Chand Investments Pvt Ltd, taking the total Munjal holding to 26%). The Munjal FIPB application says it hopes to raise up to R4,250 crore for this transaction. R4,250 crore for 7.8% versus R3,842 crore the Munjals are paying for 26% of the company! It would be interesting to see if the PE firms will now demand a reduction in prices.
It would also be interesting to see how the taxman approaches the sale. The taxman can levy capital gains tax based on the sale value of R3,842 crore, or he can refuse to accept this valuation and say the market price of Hero Honda shares will determine the capital gains. There are few precedents to go by, so how the taxman treats the case will have an important bearing on future transactions.
In other words, interesting times ahead for the Munjals and the company they will get to own 52% of.