With an objective to create incremental shareholder value, the Board of Directors of Hero MotoCorp Ltd (HMCL), the world’s largest two-wheeler manufacturer, today approved a proposal to merge Hero Investments Private Ltd. (HIPL), the investment arm of the Hero Group, into HMCL.
The merger is, however, subject to approval of the Delhi High Court, the shareholders and creditors of the respective companies, and other statutory authorities as applicable.
The shareholders of HIPL include the partnership firm Brijmohan Lall Om Prakash (BMOP) which holds 71.63 per cent, and private equity (PE) investors BC India Private Investors (19.81 per cent) and Lathe Investment Pvt. Ltd. (8.56 per cent).
BC India Private Investors is an affiliate of Bain Capital LLC, while Lathe Investment Pvt. Ltd is a wholly-owned subsidiary of Government of Singapore Investment Corporation (GIC).
The promoter family owns 52.21 per cent in HMCL through HIPL which holds 43.33 per cent shares, Bahadur Chand Investment Pvt. Ltd (BCIPL) which holds 8.67 per cent shares, and 0.21 per cent shares through other entities including individuals.
As a result of the merger, the shareholders of HIPL – BMOP (through its partners in representative capacity) and BC India Pvt. Investors and Lathe Investment Pvt. Ltd – will now directly hold approximately 31.04 per cent, 8.58 per cent and 3.71 per cent shares respectively in HMCL, which is listed in the National Stock Exchange and Bombay Stock Exchange.
The merger of HIPL into HMCL is going to benefit the public shareholders of Hero MotoCorp, as this will result in an increase in the public float of HMCL by approximately 12.29 per cent (being the shareholding of the investors in HMCL, which will now form part of public shareholding and not that of the promoter group). This will in turn increase the trading stock of the shares of HMCL. Increase in the public stock as well as trading stock will positively impact the liquidity of the shares of Hero MotoCorp.
The merger, in no way whatsoever, will have any impact on Hero MotoCorp, its shareholders and creditors. There will not be any change in the financial position of HMCL, nor will there be any change in the paid-up capital of the company. HMCL will issue and allot new shares to the shareholders of HIPL against cancellation of an equivalent number of existing equity shares held by them. Hence there will be no change in the rights of the other shareholders including public shareholders.
All costs and expenses arising out of or in connection with implementing the scheme of amalgamation shall be borne and paid by HIPL. The shareholders of HIPL will indemnify HMCL against any liability that may arise in future.
Upon the amalgamation of HIPL with HMCL in terms of the Scheme of Amalgamation, HMCL shall issue and allot equity shares to the members of HIPL whose names appear in the Register of Members of HIPL on the Record Date.
The partnership firm BMOP has five main constituents – the patriarch of the family Dr. Brijmohan Lall and the families of his four sons – and the ownership is held equally by these five constituents.