New Delhi, June 5 Hero MotoCorp, the world’s largest two-wheeler maker, said it would merge with itself Hero Investments, the investment arm of the parent firm, and set up two more plants in Gujarat and Rajasthan under an investment plan Rs.2,575 crore.
The automaker said a proposal to merge the investment arm of its parent had been approved and private equity fund Bain Capital and the Government of Singapore Investment Corp (GIC), which helped fund the company’s buyout of its former partner Honda last year, will take direct stakes in the company after the merger.
After the merger, which is subject to approval from the Delhi High Court and shareholders of the companies involved, Bain and GIC will own 8.58 percent and 3.71 percent, respectively, in the automaker, the company said in a statement.
The merger will benefit the public shareholders of Hero MotoCorp, as this will result in an increase in the public float of HMCL by approximately 12.29 percent.
The shareholders of Hero Investments Private Ltd (HIPL) include the partnership firm Brijmohan Lall Om Prakash (BMOP) which holds 71.63 percent and private equity investors BC India Private Investors (19.81) percent and Lathe Investment Pvt Ltd (8.56 percent).
Separately, Hero said it would spend Rs.2,575 crore in two new plants, an R&D centre and capacity-building in existing plants.
“The company has huge investment plans in various parts of the organisation. We will be setting up our fourth plant at Neemrana in Rajasthan with an investment of Rs.400 crore,” Pawan Munjal, managing director and chief executive officer, Hero MotoCorp, told reporters.
“The fifth plant will be set up in Gujarat with an investment of Rs.1,100 crore”, he added.
While the Rajasthan plant will be operational by the first quarter, the Gujarat plant would be commissioned by the second quarter of 2013-14. The two plants are slated to have installed capacities of 750,000 units and 1.2 million per annum each.
Munjal also said that once these two plants are commissioned the total manufacturing capacity will be over 9 million units per annum in two year’s time.
Currently, the firm produces 7 million units every year. It has three manufacturing plants in Dharuhera and Gurgaon in Haryana and Haridwar in Uttarakhand.
The firm will also be setting up an integrated R&D centre at Kukas, Jaipur, with an investment of Rs.400 crore. This centre will be operational by the second quarter of 2014.
The company will also be investing Rs.500 crore for capacity expansion at existing plants and Rs.175 crore for various other works.