Sale Of Honda's Stake: Future At Hero Honda

India is the second largest two wheeler market in the world after China

. Demand for two-wheelers is up by 24.52% from 2009 to 2010 with total sales of 10.5 million units. The motor cycle segment contributes around 80% of the two wheeler market. The key factors driving the growth are huge demand for two wheelers from rural India, availability of easy financing options and lack of quality public transport infrastructure. The worlds largest two wheeler company, Hero Honda Motors Limited is the leading player in the Indian market. Hero Honda is a joint venture between Indias Hero group and Honda Motor Company of Japan. Hero Honda leads the market with the total unit sales of 4,600,130 two-wheelers in the year 2009-10. Company recorded a profit figure of Rs. 2231.83 Crores in the FY 2009-2010, with 23.6% growth in unit sales.

Recently the 26 years old partnership saw a turn, when Hero group and Honda Motors decided to part ways, with Honda motors selling its entire stake in Hero Honda Motors Limited. Shareholding pattern of Hero Honda consists of 26.2% with Hero group (Indian promoter), 26% with Honda Motors (foreign promoter), 31.75% with foreign Institutions, 7% with general public and rest 10% is with financial institutions, banks and mutual funds etc. Honda Motors stake in the company has a market value of nearly $2 billion which will now be taken by the Hero Groups Munjal family. Till now Honda Motors has provided the technology support for the products and Hero Honda has manufactured and sold the products through its large dealership network. Honda is being paid royalty on each product sold by Hero Honda. The strong technological prowess of Honda group with strong dealership network of Hero has made the partnership as one of the most successful JV in the history. As per the sources, Honda and Hero were sparring on issues such as increasing royalty and spare part purchases through Honda Motorcycles and Scooters India, which Hero group had been resisting since long time. Also now Honda group wants to focus on its wholly owned Indian unit established in the year 1999.

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by: www.365businessdays.com

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