The Hero Group and Honda will sign a separation deal this month to end their 26-year-old joint venture Hero Honda, under which Indian partner will buy out the 26% stake owned by its Japanese counterpart.
According to sources in the know of the development, the two partners have agreed that current royalty rate per model paid to Honda will remain unchanged. The royalty paid in 2009-10 on an average was 2.3% to 3% of sales.
Moreover, Honda will continue to provide technology and models to the Hero Group for a transition period, the minimum for which is till 2014 as per their existing joint venture agreement.
“The deal is at the final stages and could be signed within this month,” a source said, however, adding the partners are still having last minute negotiations on the valuation.
The source said that interest of investors and all stakeholders of Hero Honda have been given top priority during the negotiations and it would not be compromised at any cost.
When contacted, a Hero Honda spokesperson declined to comment. On the other hand, Honda said it and the Indian partner “regularly hold discussions about the future of the joint venture. However, at this time, nothing is available to disclose.”