Hero Honda Seeks Nod To Double FII Stake

New Delhi, July 24: | Updated: Jul 25 2002, 05:30am hrs
The world’s largest two wheeler company Hero Honda is taking shareholders’ approval in August for nearly doubling the level of investment by foreign institutional investors (FIIs) to 40 per cent in the company from the existing level of 22 per cent.

The company’s board has already cleared the proposal, Hero Honda vice-president finance Ravi Sud told FE.

At present, as per government policy, FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to 49 per cent of the paid-up equity capital of the investee company, subject to approval of the board of directors and of the members by way of a special resolution.

“The increased investment by foreign investors is considered to be in the interest of the company”, a Hero Honda official said.

Hero Honda is also planning to increase the board strength and may appoint more directors, who may be nominated and designated by the promoter group and the collaborator, Honda Motor Co of Japan. Honda Motor Co and Munjals hold 26 per cent equity each in the company.

The company feels that there may be a need to do so since there has been substantial growth in its operations and also in view of its expansion plans, including the setting up of a new plant. Besides chairman Brijmohan Lall Munjal and managing director Pawan Kant Munjal, the directors include Akio Kazusa (joint managing director), Kazumi Yanagida, Satyanand Munjal, Om Prakash Munjal, S Toshida and Motohide Sudo.

The company is planning to amend the Articles of Association in the next annual general meeting to be held soon. Hero Honda plans to expand its capacity from 1.5 million units to 2 million over the next one year, to cater to the huge demand of motorcycles.

The company is planning to set up a third plant to meet the demand beyond two million units that the existing plants shall be able to meet. The feasibility study for the third plant is already on and a decision is expected soon.

Two wheeler sales in the country are likely to grow at a compounded growth rate between five to 10 per cent per annum over the next five years. The growth rates, however, are likely to have high fluctuations from year to year. Total two wheeler sales are expected to be 6 to 7 million by 2006-7.

The company has two plants located at Dharuhera and Gurgaon in Haryana. Hero Honda Motors had recorded a 77 per cent increase in net profit at Rs 139.16 crore in the first quarter ended on June 30, 2002 from Rs 78.81 crore in the corresponding period previous year.