The Competition Commission of India has approved the combination of Hero Investments Private Limited and Hero Moto Corp Ltd (HMCL).
Earlier this month, the two wheeler major’s board had approved the proposal to merge the investment arm of its parent — Hero Investment Pvt. Ltd — into the automaker. The move comes eighteen months after Hero Moto Corp announced its split from Honda Motor.
The entire share capital of Hero Investments is held by the promoters who are promoters of Hero Moto Corp, private equity fund BC India Private Ltd and Lathe Investments.
The promoters hold 71.63 per cent of the share capital while Bain, through BC India Pvt Investors and GIC, via Lathe Investment, hold 28.36 per cent in Hero Investment. Hero Investments holds approximately 43.33 per cent of the share capital of HMCL.
“The Commission is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India and therefore, the Commission hereby approves the proposed combination,” CCI said in an order.
The Commission said HIPL is not engaged in the production, supply, distribution, storage, sale or trade of any kind of goods or services.
“It is observed that the proposed combination relates to amalgamation of an investment holding company of HMCL i.e., HIPL into HMCL and that both the companies are engaged in different business activities, therefore, the proposed combination is not likely to give rise to any adverse effect on competition in India,” CCI said in its order.
In HMCL, the promoter family owns 52.21 per cent through HIPL, which holds 43.33 per cent shares, Bahadur Chand Investment Pvt. Ltd (BCIPL) which holds 8.67 per cent shares, and 0.21 per cent shares through other entities including individuals. CCI said that after the proposed combination, the shareholders of HIPL would directly hold shares in HMCL, which are currently held in HIPL, which would ultimately result in reduction of promoter shareholding in HMCL from 52.21 per cent to 39.92 per cent.
Hero's promoters decided to buy Honda's 26 per cent stake in the automaker in December 2010, ending a 26-year-old joint venture partnership. Last year, Bain and GIC made investments in Hero Investments, which were used to help repay debt taken out for the $851 million purchase of the Japanese company's stake.