Shares of two-wheeler giant Hero Honda raced up by nearly 4 per cent in the early trade on the BSE, a day after the FIPB referred the Indian promoter’s proposal to raise Rs 4,500 crore to the Cabinet Committee on Economic Affairs for clearance.

Munjals, promoters of Hero Investments Pvt Ltd, are looking to raise funds to finance the buyout of Japanese partner Honda’s stake in Hero Honda through a stake sale to private equity and foreign funds.

Cheering the development, the company shares climbed by 3.73 per cent to an early high of Rs 1,521.60 apiece on the Bombay Stock Exchange. In a similar fashion, the scrip witnessed a 3.37 per cent surge on the National Stock Exchange to Rs 1,522.

Later in the morning session, the scrip was trading up by 2.67 per cent at 1,506 on the BSE and up by 2.36 per cent at Rs 1,507 on the NSE.

Hero Investments is one of the main shareholders in Hero Honda, with a 17.33 per cent stake in the company as of December 31, 2010.

In December last year, the promoters of HIPL, the B M Munjal family, agreed to buyout the entire 26 per cent stake of Japan’s Honda in Hero Honda for an undisclosed sum.