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Hero Honda Underweight
HROH.BO, HH IN
Munjals buy stake from Honda at Rs740 per share
• Munjals acquire stake from Honda at Rs740 per share: The inter se
promoter transfer between Honda and the local Munjal family is now
complete with Honda selling its 26% stake i.e. 51.9m shares at a price
of Rs739.97 per share. The transaction will involve an outlay of
Rs38.4B ($850m).
• The price at which the sale has transacted appears to be based on a
Right of First Refusal agreement that these JV partners had entered
into earlier. This is similar to the transaction between TVS and Suzuki
when the JV partners split up. TVS Motors and Suzuki parted in Sep
2001, with the Indian promoters buying the latter’s stake at Rs15 per
share, which was significantly below the prevailing market price of
c.Rs70.
• The Munjal family has bought the stake of Honda via its company –
Hero Investments Private Ltd.
• Media (Economic Times) reports that the Munjal Group will likely
offload a part of the acquired stake to private equity firms. We await
further clarity on the same.
• Our View: We believe that while the transition for Hero Honda will be
gradual; the local group will face challenges relating to a) R&D scale
up & incremental costs therein, b) branding challenges in new export
markets, and c) rising competition in the local markets, which could
entail higher brand spends. We re-iterate our UW rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hero Honda Underweight
HROH.BO, HH IN
Munjals buy stake from Honda at Rs740 per share
• Munjals acquire stake from Honda at Rs740 per share: The inter se
promoter transfer between Honda and the local Munjal family is now
complete with Honda selling its 26% stake i.e. 51.9m shares at a price
of Rs739.97 per share. The transaction will involve an outlay of
Rs38.4B ($850m).
• The price at which the sale has transacted appears to be based on a
Right of First Refusal agreement that these JV partners had entered
into earlier. This is similar to the transaction between TVS and Suzuki
when the JV partners split up. TVS Motors and Suzuki parted in Sep
2001, with the Indian promoters buying the latter’s stake at Rs15 per
share, which was significantly below the prevailing market price of
c.Rs70.
• The Munjal family has bought the stake of Honda via its company –
Hero Investments Private Ltd.
• Media (Economic Times) reports that the Munjal Group will likely
offload a part of the acquired stake to private equity firms. We await
further clarity on the same.
• Our View: We believe that while the transition for Hero Honda will be
gradual; the local group will face challenges relating to a) R&D scale
up & incremental costs therein, b) branding challenges in new export
markets, and c) rising competition in the local markets, which could
entail higher brand spends. We re-iterate our UW rating on the stock.
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