Mumbai/New Delhi: India’ Hero Group and Honda Motor denied a television report the Japanese auto maker was looking to sell its stake in joint venture Hero Honda, helping the Indian company’s shares wipe out losses.
Honda owns a 26% stake valued at about $2 billion in Hero Honda, India’s largest motorcycle maker. Honda also has a 100% owned subsidiary that makes motorcycles in India, competing with Hero Honda.
On Tuesday, television channel ET NOW said Hero Group founders, the Munjal family, were in talks to buy out 20% of Honda’s stake in Hero Honda, while private equity firm KKR might buy the remaining six percent.
“The news report is incorrect and speculative,” the Hero Group said in a statement. “We have already conveyed earlier that the Hero Group and Honda Motor have for years enjoyed a very cordial and fruitful relations ... and there has been no change in the relationship in any manner,” it added.
Shares in Hero Honda, ended flat after the denial. The shares had earlier fallen as much as 6.8% to its lowest level in more than six months. More than 200,000 shares were traded in Hero Honda, 2.2 times the daily average over the past 30 days.
Citing unidentified sources, ET NOW reported the Munjals would pay Rs7000 crore ($1.5 billion) to buy the 20% stake from Honda. Based on Hero Honda’s market value of Rs35,800 crore ($7.5 billion) on Monday, a 20% stake would be worth Rs7200 crore.
Responding to the report, Honda, Japan’s No. 2 automaker, said the company had no plans to sell its stake in Hero Honda at this time. KKR officials were not immediately available for comment.
Hero Honda, which makes the CD range of bikes, Splendour, Glamour and Pleasure scooters, has lost market share in the motorcycle segment in recent months to rival Bajaj Auto and Honda Motorcycle & Scooter India - Honda’s India unit.
Hero Honda’s market share dipped to about 54% in the quarter ended June, from 62% in the year-ago period.