Hero Honda skids on reports of end of JV with Honda

Hero Honda skids on reports of end of JV with Honda

MUMBAI: Hero Honda Motors tumbled nearly five per cent in the early trade on the Bombay Stock Exchange on Monday, on reports that Japan’s Honda Motor has reached an agreement with its Indian partner, Hero Group, to dissolve the partnership in the two-whe eler manufacturer.

Reacting sharply to the move, the stock opened on a weak note and fell by 4.72 per cent to hit a month-low of Rs 1,745 on the BSE, to become the worst performer among the front-line stocks.

Similarly, the scrip plunged 2.62 per cent to trade at Rs 1,791.30 on the National Stock Exchange.

According to media reports, Honda will sell its entire stake in the motorcycle manufacturer to the Hero Group’s founding family — the Munjals and investment funds by as early as March 2011.

Honda and its Indian partner Hero Group will seek approval for the breakup from their respective boards of directors later this month.

Media reports further suggest that investors are not in favour of Honda Motor selling its share to Munjals-led group on a discounted price, as they fear this well lead to Hero Group having to pay more in royalty to the Japanese automobile major.

Last week, the stock tanked 5.9 per cent on reports that the Hero Group has agreed to increase the royalty payments made to Honda Motor to 8 per cent of the overall annual sales in return for a technology makeover and stake-sale. — PTI