Rumours are growing stronger and stronger that Hero Group and Japanese automaker Honda have decided to part ways in the Indian market. According to sources, both the companies are planning to go independent in the domestic market which is emerging as one of the strongest contenders in the global auto market. Sources close to the deal state that Munjal family led by Brijmohanlal Munjal will buy the 26% stake from Honda.
Hero Honda joint venture was formed in 1984 between Indian Hero group and Japanese Honda. It is one of the most successful joint ventures in the world. The company is apparently further considering a phased sell-out across four tranches of 6.5 per cent each, which could rake in Rs 9,000 crore at current market prices.
“The Hero top management visited Japan recently to discuss the agreement and talks have now been going on for several months now,” sources said. There was no official confirmation on this from the company.
According to auto experts and industry analysts, the break is not likely to benefit either of the companies in the current scenario. However, Honda may emerge as a stronger brand in the long run. Honda will have its task cut out on advertising its brand and sprucing up its distribution network, which is a sixth of Hero Honda’s. On the other hand, Hero Group will also be cut out from the royalty, technical fees, and export revenues that it had been earning so far. There is, of course, the issue of sourcing components from Honda Motor India (the entity created for this function) but speculation is rife that the Hero group will not be tied down with this.
Both Hero Group and Honda have so far denied any such reports but the strong speculations reveal that “there cannot be smoke without a fire.”
