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The last leg of Hero Group's buyout of Honda Motors' 26 per cent stake in the 26-year old joint venture Hero Honda Motors Ltd is now complete.
The Cabinet Committee on Economic Affairs (CCEA) on Tuesday approved a proposal for Rs 4,500- crore foreign direct investment (FDI) in Hero Investments Pvt Ltd (HIPL) by two private equity firms – BC India Investors II, part of Bain Capital and Lathe Investment Pvt Ltd.
HIPL, the investment arm of Hero Group, is one of the two main investors in Hero Honda, the country's largest two-wheeler maker. Post buy-out of Honda's 26 per cent equity for Rs 3,842 crore, HIPL's stake in the two-wheeler maker stands at 43.33 per cent.
The Hero Group expects to use the funds raised from the PE firms to retire part of its debt raised by HIPL recently for financing the Honda stake buyout. Shares of Hero Honda gained 3 per cent on the BSE to close at Rs 1,546.
CCEA also approved FMCG major Reckitt Benckiser's plan to invest about Rs 3,300 crore through a subsidiary to fund its acquisition of Paras Pharmaceuticals Ltd. In December, Reckitt Benckiser had agreed to fully acquire Ahmedabad-based Paras for Rs 3,260 crore.
Reckitt Benckiser's proposal to set up a wholly-owned subsidiary – an investing company with 100 per cent foreign equity to make downstream investment to acquire Paras – was cleared by CCEA.
“The approval is expected to result in FDI amounting to Rs 3,300 crore approximately in the wholly-owned subsidiary of Reckitt Benckiser Plc UK,” an official statement said.
The shares of the new subsidiary will be 100 per cent subscribed by Reckitt Benckiser (Singapore) (entire equity except 10 shares) and R&C Nominees Ltd (10 shares), the statement said.
Other approvals
Among other proposals, the CCEA also approved a short-term loan of Rs 5,000 crore to the Food Corporation of India for 2010-11 to meet its working capital requirements.
It also approved a one-time grant-in-aid of Rs 378 crore as budgetary support for the implementation of GPS-aided Geo Augmented Navigation System (GAGAN).
The Rs 774-crore GAGAN project is being jointly developed by the Airports Authority of India and the Indian Space Research Organisation.
The project, expected to be ready for operational use by May 2013, would help in seamless navigation over the Indian airspace.
It would be an all weather national infrastructure and can be used by defence services, security agencies, Railways, surface transport, shipping, telecom industry and personal users of position location based services, the statement said.
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