Hero Honda surges in In­dia as Honda cuts mo­tor­cy­cle tech costs

The Pak Banker - - Company& -

NEW DELHI: Hero Honda Mo­tors Ltd., maker of half the mo­tor­cy­cles sold in In­dia, jumped the most in more than a year af­ter say­ing that Honda Mo­tor Co.'s sale of a $1.9 bil­lion stake will lead to lower technology-roy­alty pay­ments, Bloomberg re­ported.

The mo­tor­cy­cle maker rose as much as 11 per­cent to 1,871.80 ru­pees at 10:28 a.m. in Mum­bai trad­ing, the biggest in­tra­day jump since May, 2009. The com­pany fell 8.3 per­cent in a month through Dec. 16 on con­cern it would need to pay more to use Honda's technology fol­low­ing the Tokyo-based com­pany's exit from the ven­ture.

Hero Honda's roy­alty pay­ments will de­cline from as early as Jan­uary as the com­pany will de­velop more mod­els it­self, Hero Group said last week af­ter agree­ing to buy Honda's stake in the mo­tor­cy­cle-maker. The com­pany will also be freed from re­straints that were part of the ven­ture agree­ment, al­low­ing it to be­gin sales in new mar­kets such as Africa and In­done­sia, said Ashish Nigam, an An­tique Stock Broking Ltd. an­a­lyst.

"The man­age­ment has ad­dressed a very se­ri­ous con­cern by cat­e­gor­i­cally stat­ing that the un­der­ly­ing roy­alty rates will not in­crease," Mum­bai-based Nigam said in a note to clients to­day. The com­pany has pre­vi­ously "missed out" on ex­port op­por­tu­ni­ties that have helped boost sales for Ba­jaj Auto Ltd. be­cause of the ties with Honda, he said.

Nigam raised his rec­om­men­da­tion on New Del­hibased Hero Honda to "buy" from "hold." He also raised his fore­cast for Hero Honda's unit ex­ports next fis­cal year by 1 per­cent.

The mo­tor­cy­cle-maker rose 10 per­cent to 1,853.55 ru­pees as of 10:29 a.m. in Mum­bai trad­ing. It was the only stock among the 30 com­pa­nies in the Sen­sex in­dex to rise more than 1 per­cent. The in­dex fell 0.4 per­cent.

Hero Group, con­trolled by the Mun­jal fam­ily, will buy Honda's 26 per­cent stake in a "phased man­ner," the com­pa­nies said in a state­ment on Dec. 16, with­out say­ing how much it will pay. The com­pany al­ready owns 26 per­cent of the mo­tor­cy­cle-maker, which has a mar­ket value of $7.4 bil­lion based on the Dec. 16 clos­ing price, ac­cord­ing to data com­piled by Bloomberg. In­dia mar­kets were closed on Dec. 17 for a hol­i­day.

Honda, the world's largest mo­tor­cy­cle maker, plans to exit the ven­ture to fo­cus on its fully owned unit in In­dia. The com­pany, which formed Hero Honda with Hero Group in 1984, rose 1.6 per­cent to 3,285 yen in Tokyo.

Hero Honda will cre­ate a new brand and search for "new mar­kets" over­seas as Honda quits the ven­ture, Chief Ex­ec­u­tive Of­fi­cer Pawan Kant Mun­jal said on Dec. 16. The mo­tor­cy­cle-maker paid 2.6 per­cent of sales to Honda as roy­al­ties in the fis­cal year ended in March, ac­cord­ing to its an­nual re­port. -

In a sep­a­rate news item, Hin­dus­tan­times re­ported an­other day that barely a day af­ter it worked out a sep­a­ra­tion from the Hero Group to chart its own course in mo­tor­bikes, Ja­pan's Honda Mo­tor suf­fered a jolt at the week­end when it faced a flash strike. Pro­duc­tion at Honda Mo­tor­cy­cle and Scoot­ers In­dia's (HMSI) Mane­sar fac­tory re­sumed on Sun­day af­ter a brief un­rest, when work­ers struck work against the al­leged as­sault on a ca­sual worker by one of the fac­tory's se­cu­rity staff. Honda kept the plant shut on Satur­day, ad­vanc­ing its hol­i­day to avoid trou­ble.

The strike, which the com­pany says was a mi­nor in­ci­dent, hap­pened a day af­ter Honda an­nounced it will sell off its 26% stake in world's largest two-wheeler com­pany, Hero Honda Mo­tors Ltd. It sym­bol­ised the Ja­panese firm's prob­lems in man­ag­ing in­dus­trial re­la­tions in In­dia.

Last year, HMSI, now the coun­try's largest scooter maker, suf­fered a loss of over R300 crore af­ter work­ers went on a go-slow strike that had re­sulted in pro­duc­tion dip­ping by over 50% for nearly three months. In 2005, it wit­nessed its biggest cri­sis when a vi­o­lent strike by work­ers rocked the Gur­gaon-Mane­sar belt.

"The is­sue has been re­solved am­i­ca­bly and pro­duc­tion is back to nor­mal lev­els," Harb­ha­jan Singh, as­sis­tant gen­eral man­ager, in­dus­trial re­la­tions, HMSI told Hin­dus­tan Times. "We have or­dered an in­ves­ti­ga­tion into what hap­pened on Fri­day when a con­trac­tual worker en­tered the premises with­out his iden­tity and punch­ing card and a se­cu­rity guard dealt with him in a high handed man­ner," he added.

He said the guard was sus­pended from work pend­ing in­ves­ti­ga­tions and labour lead­ers had ad­dressed work­ers on Satur­day to bring the sit­u­a­tion un­der con­trol.

There are around 1,400 con­trac­tual and as many per­ma­nent work­ers who work in the plant in ev­ery shift. Pro­duc­tion suf­fered for 5 hours on Fri­day. With two groups of trade unions op­er­at­ing, there was a chance for "triv­ial is­sues" be­ing blown out of pro­por­tion, Singh said. The Mane­sar fac­tory pro­duces 1.6 mil­lion two-wheel­ers per an­num with a daily pro­duc­tion of 5,500 units. -Bloomberg

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.