Hero MotoCorp kickstarts foreign ride with $40-million Bangladesh venture

Written by feBureau | New Delhi | Updated: Apr 22 2014, 16:11pm hrs
HeroHero MotoCorp to hold 55% in joint venture with Nitol Niloy Group. PTI
* Hero MotoCorp, the countrys largest two-wheeler maker, announced on Monday that its first overseas manufacturing investment will be in neighbouring Bangladesh. For a total investment of $40 million (R242 crore) over five years, the company is setting up a plant in a joint venture with the Nitol Niloy Group. Hero will hold 55% in the JV.

While the plant will start operations by the second quarter of FY16, Hero is already launching 11 of its products, including 100cc entry-level bikes, in Bangladesh. These are the HF Dawn, Splendor Pro and Passion Pro, 125cc deluxe segment bikes Super Splendor and Glamour, 150cc premium segment models Xtreme and Hunk, and the 100-cc scooter Pleasure. The company aims to initially have 50 sales outlets.

Pawan Munjal, MD & CEO, Hero MotoCorp, said the JV targets 20% market share in the first year of operations. The commencement of our operations in Bangladesh is a significant milestone in our strategic global expansion plans. In addition to being our first overseas joint venture, this is also our first manufacturing plant outside of India.

Added Abdul Matlub Ahmad, chairman of the Nitol Niloy Group of Companies, The aim is to provide technologically-advanced, innovative and fuel-efficient two-wheelers for customers in Bangladesh. With this JV, we will be playing a catalyst role in the development of the ancillary industry in Bangladesh and beyond.

The JV will get a total equity injection of $12.6 million in a ratio of 55:45 over a period of two years while capex has been fixed at $23.2 million in the first year of operations (FY15). The total investment planned is $40 million over the next five years.

Hero's manufacturing investment in Bangladesh, which is expected to be followed by similar announcements for other markets like Colombia and Brazil, follows the company's plans to expand sales to 50 countries by 2020. Hero, which already runs assembly units with partners in Kenya, Tanzania and Uganda, has already announced a target of 10 million units (overall volumes) by FY18, of which 1 million would come from overseas.

On the Bse, the Hero MotoCorp scrip closed at R2,246.20, up 1.29%, on Monday.