New Delhi: The Delhi-based Hero group has realigned businesses between brothers Pawan and Sunil Munjal.
As part of this, Sunil Munjal, 55, will step down as joint managing director of Hero MotoCorp Ltd, India’s largest motorcycle maker, next month to lead the group’s ventures in defence and power, two people familiar with the matter said on Thursday, asking not to be identified.
Pawan Munjal, 61, chairman and chief executive officer of Hero MotoCorp, said the move will “further stimulate the immense diversification opportunities that the Hero group envisions for itself, while enabling family members to pursue their own aspirations”. He himself will continue to focus on the group’s auto business.
The new ventures will be spearheaded by Sunil Munjal’s company, Hero Corporate Service Ltd.
“It is a family decision and not one where Hero MotoCorp had any role to play. The group now wants to diversify aggressively and it wants to focus on high-growth business areas,” said one of the two people cited above.
“Defence and power are the businesses that the group is actively looking at. Sunil Munjal will lead those ventures. To be able to concentrate on those businesses, he will be stepping down after his tenure at Hero MotoCorp ends on 16 August,” this person said.
Sunil Munjal did not respond to phone calls or text messages on Thursday. In a statement, he said the entire Munjal family believed the group’s diversification drive needs a fillip to accelerate growth.
“This is also an exciting time for me to consolidate and strengthen some of the existing businesses and to explore new opportunities that are close to my heart,” he said.
The statement said Sunil Munjal will realign “his business/partnership stake in the Hero Group”.
The second person cited earlier said the realignment would result in a payment to Sunil Munjal. He added that this wouldn’t be much.
“As part of the realignment, he (Sunil Munjal) will focus on some of the other Group businesses including Hero Corporate Service and its allied companies as the Chairman, while he also pursues new business interests,” the statement said.
Separately, Hero MotoCorp informed BSE that the realignment will have no impact on the overall promoter shareholding, strategic direction or operational management of the company.
Shares of Hero MotoCorp fell 0.35% to Rs.3,192.30 at the close of trading on BSE on Thursday, while the exchange’s benchmark Sensex rose 0.66% to 28,208.62 points.
Hero Corporate Service is a small part of the $6 billion Hero group founded by Brijmohan Lall Munjal, the Munjal family patriarch who died last year at the age of 92.
The unit comprises five strategic businesses: insurance distribution, Hero Realty Ltd, Hero Management Service Pvt. Ltd, Ludhiana-based Hero Steels Ltd and Hero Mindmine Institute Pvt. Ltd.
The Munjal family has been looking to diversify into new business areas to power the group’s future growth and accommodate third-generation family members.
Rahul Munjal, son of the late Raman Kant Munjal, founded Hero Future Energies Pvt. Ltd, a renewable energy firm, in 2013 with the target of producing 1 gigawatt of power by 2016-17.
Rahul’s younger brother, Abhimanyu, founded the group’s financial services business, Hero FinCorp Ltd, which expects to build a Rs.5,000 crore loan book by 2016-17.
Akshay—son of Suman Kant Munjal, managing director of Rockman Industries Ltd—has entered the education business by opening a university in Manesar, Haryana.
Akshay’s brother Ujjwal works with their father at Rockman Industries and has also founded Hero Electronix. Their younger brother, Vidur, has just finished his studies overseas and will look to gain some work experience before joining the family business.
Pawan Munjal, managing director and chief executive at Hero MotoCorp, has two daughters and a son. The son, Anuvrata, studies abroad; the elder daughter, Vasudha, runs a chocolate boutique under the brand Choko La; the other daughter, Supriya, has a clothing line.
Sunil Munjal, the youngest son of Brijmohan Lall Munjal, has a daughter, Shefali, who assists him at Hero Corporate Service.
The state of India’s economy in recent years has slowed the Hero group’s aggressive diversification plans, said the second person cited earlier.
“Defence has become very big after the government allowed 100% FDI (foreign direct investment) in the sector. We can’t afford to miss out in that segment, like any other business house,” the person said.
Defence is a key part of the central government’s Make in India drive to encourage manufacturing and attract foreign investment.
The Hero group sold a 3.5% stake in flagship Hero MotoCorp in February 2015, raising $306 million. The sale proceeds would be utilized to fund new growth opportunities, said the person cited above.