Eighteen months after it parted ways with Honda Motor, Hero MotoCorp Ltd (HMCL), the country’s largest two-wheeler manufacturer, announced on Monday it will invest Rs 2,575 crore to set up two new plants in Rajasthan and Gujarat and an integrated research and development (R&D) centre that would boost its annual production capacity to nine million from the current seven million.
Hero’s promoters, bought out Japanese auto major Honda’s 26% stake in Hero Honda last year, ending a 26-year-old partnership.
The Munjal family, the company’s promoters, bought out Honda’s stake for $851 million (about Rs 4,200 crore) through their unlisted private investment arm HIPL in which Bain and GIC held a significant stake. The private equity funds will own equity in the listed Hero MotoCorp following HIPL’s merger with the parent holding company.
“From our perspective, this is the best time to invest, so that when growth comes in, we are prepared for it,” said Pawan Munjal, MD and CEO.
The investment will be funded through cash reserves of Rs 4,000 crore, said Ravi Sud, chief financial officer. Hero sold over 6.2 million motorcycles and scooters in 2011-12 and has a marketshare of 55% in the domestic two-wheeler market.
The company, which has a market capitalisation of around Rs 36,802 crore, was all set to embark on its global journey by starting exports to new countries, said Munjal. The first exports will begin in the next quarter to countries in Central America and Nigeria in Africa.
The company will set up an integrated R&D centre spread over 250 acres at Kukas, Jaipur in Rajasthan, pumping in Rs 400 crore, which is going to be the largest two-wheeler R&D centre in the country.