A series of off-market transactions will see Japanese auto major Honda exit its 25-year-old joint venture with the Munjals in Hero Honda with the entire deal likely to be wrapped up in the next six months. The deal, which will be executed in two phases, will see the Munjal family - led by Brijmohan Lal Munjal group - form a special purpose vehicle (SPV) to buy out Honda's entire 26% stake in the venture. This would eventually be thrown open for private equity participation.
According to highly-placed sources, the Japanese auto major has decided to exit the highly-profitable Hero Honda JV — which controls more than 50% of the Indian two-wheeler market — as it focuses more on its fully-owned two-wheeler subsidiary, Honda Motorcycle and Scooter India (HMSI). HMSI has been growing rapidly and is in the process of setting up a second factory in the country.
Rising friction between the two partners and HMSI's growing competition with Hero Honda were the reasons that has prompted the two partners to go separate ways, said market sources. When contacted, a spokesperson for Honda Motor Japan said, ''There is no such plan at the moment."
A spokesman for the Hero group said, ''The information is incorrect. The Hero Group and Honda Motor Co, Japan, have for years enjoyed a very cordial and fruitful relationship, resulting in millions of satisfied Hero Honda customers across the country. Contrary to market speculation, there has been no change in this relationship."
