» Business » Hero to offload 20% pie to US bank

Hero to offload 20% pie to US bank

May 17, 2005 11:16 IST

The Pankaj Munjal-controlled Hero Motors is in talks with a large investment bank in the US to off-load 20 per cent equity through a private placement.

The company was earlier in talks with its technology partner Aprilia. But the talks fell through after the Italian two-wheeler company was taken over by Piaggio.

Munjal said the company is not keen on a restricted alignment with a single OE manufacturer and would rather off-load stake to a strategic partner who can bring more business to the table.

"The investment banker we are in talks with has stake in several large automobile companies across the world. We see a lot of synergy flowing through this equity placement," Munjal said.

Hero Motors had also revamped its operations to include a host of automobile engineering services under a new banner Hero Integrated Services.

While Hero Motors, along with its sister concern, Majestic Auto, will continue to make mopeds and step-throughs, the focus would now on be on offering state-of-the-art engineering services that would include development and manufacture of transmission and engine assembly.

"After the IT and pharma outsourcing story, we see the engineering services as the next big wave which we would capitalise on. Being a part of the Hero Group, we see every door opening up for us," he added.

Under the revamped operations HIS will offer its services under five pillars -- sheet metal unit, engine unit, ferrous casting unit, Hero Global Design and dedicated engineering centres.

The roadmap developed for the next five years projects a turnover for the company of Rs 980 crore (Rs 9.8 billion) by 2010.

"Based on the current order book position for the HIS, we are expecting a total revenue of Rs 392 crore (Rs 3.92 billion) in 2006-07 and Rs 689 crore (Rs 6.89 billion) in 2007-08," Munjal informed.

The current year's turnover however will see a minor dip to Rs 178 crore (Rs 1.78 billion) from the previous year's turnover of Rs 219 crore (Rs 2.19 billion). The operations of Majestic Auto, under which Hero Motors was reporting its financial numbers, has now been hived-off.

"Given there is a demand for 15 million bicycles in this country, we see the moped business too growing, though at a very moderate pace. We will continue to be in this business and manufacture mopeds and step-throughs through both companies," Munjal said.

Hero Motors has also signed an MoU with an Austrian firm for developing transmission units for a 810cc engine.

Order for 15,000 units has already been signed for the first year of operations and is expected to reach substantial volumes in the next five years. "Going forward, we would also be designing and developing the engines," he said.

An investment of Rs 140 crore (Rs 1.4 billion) is already line up to beef up its facilities in both Ghaziabad and Manesar to handle the new lines of businesses under the HIS banner.
S Kalyana Ramanathan in New Delhi
Source: source