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Hero MotoCorp Ltd on Monday said it is acquiring 49.2 per cent equity in the US-based Erik Buell Racing (EBR) for $25 million (about Rs 148 crore). This is Hero MotoCorp’s first equity investment out of home country.
Earlier, the Indian two-wheeler maker had a technology sourcing pact with EBR. EBR is motorcycle engineering, designing and manufacturing company promoted by Erik Buell, a motorcycle racer.
Buying equity in EBR would help Hero MotoCorp to procure technology, which is one of the core requirements after the Indian company broke its 26-year-old alliance with Japan’s Honda in December 2010.
In fact, since December 2010 Hero MotoCorp, which is world’s largest two-wheeler manufacturer, has not introduced new models.
It will also help Hero MotoCorp to explore markets in Western countries and introduce new products.
“This is the first time Hero MotoCorp has gone out of the country to buy equity. It is the first step in globalisation of Hero MotoCorp,” said Pawan Munjal, Managing Director and Chief Executive Officer.
The investment is being made through Hero MotoCorp’s wholly owned American Subsidiary – HMCL (NA). The first tranche of $15 million has been invested by Hero MotoCorp on June 28. The second tranche of $10 million is proposed to be invested within the next nine months.
With this equity partnership, Hero MotoCorp will now have representations on the EBR board with two directors and one observer.
NEW LAUNCHES
Hero MotoCorp expects to export nearly 75 per cent more (350,000 units) in 2013-14 from 200,000 units exported in the previous year.
Hero MotoCorp and EBR would promote selling and marketing of motorcycles in the Western Countries, namely North America and Europe, Munjal told mediapersons.
The investment would be funded by company’s internal accruals, he added. Now, the Indian company plans to set up an assembly line for EBR.
Munjal said the company would introduce new models during Diwali. These would be refurbished versions of the present models. Bikes based on ‘greenfield platform’ would be rolled out in 2014, he said.
Hero MotoCorp aims to start manufacturing bikes from Neemrana in Haryana by the fourth quarter of 2013-14. On the other hand, it is awaiting more land at Halol in Gujarat to start construction of another manufacturing unit.
OVERSEAS MARKETS
Hero MotoCorp plans to ride into new countries in Africa (Kenya, Ivory Coast, and Burkina Faso) and Latin America (Equador, Peru) to garner bigger global foot print.
Munjal said that it plans to set up assembly units in Colombia, Kenya and Nigeria.
He did not divulge the investment required for the same.
Currently, the company makes bike in India and has an assembly line in Bangladesh.
The shares of Hero MotoCorp closed 2.18 per cent up at Rs 1,698.50 on Monday on the BSE.
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