HIPL to raise Rs 3500 cr; Hero Honda falls over 2%
Hero Investments (HIPL), part of the Brijmohan Lall Munjal-led Hero Group, will pledge its shares in Hero Honda with institutional investors to raise about Rs 3,500 crore in short-term debt to buy Honda Motor’s stake in their joint venture, said t...
By ET Bureau |
MUMBAI: Hero Investments (HIPL), part of the Brijmohan Lall Munjal-led Hero Group, will pledge its shares in Hero Honda with institutional investors to raise about Rs 3,500 crore in short-term debt to buy Honda Motor’s stake in their joint venture, said two people privy to the deal.
The shares will be kept as collateral till the Hero Group retires the debt, which will be raised through non-convertible debentures (NCDs) expiring in threemonths . Lenders, including mutual funds, are asking HIPL to pledge shares worth 1.5 times the money it is raising through debt, said a top official in one of the mutual funds, which is negotiating to invest in the short-term paper.
HIPL would thus have to pledge shares worth 5,250 crore, if it were to raise Rs 3,500 crore. The value of Hero Investments’ 17.33% stake, as per Hero Honda’s closing price on Friday is about Rs 5,100 crore. A Hero spokesperson did not respond to an email query. He was not reachable on his mobile phone and did not respond to a text message. The debt will enable the group buy Honda’s 26% stake in bike maker Hero Honda till private equity firms bring in the money.
ET reported in its February 25 edition that Bain Capital and the government of Singapore’s investment arm are funding the group to the extent of 3,900 crore to buy the Japanese automaker’s stake in Hero Honda. The private equity firms would together own 13% in Hero Honda after this deal. “The group is raising debt because funds from private equity firms will take atleast a couple of months and Honda is wanting an early exit,” said a top official with a mutual fund who was approached to raise the short-term debt. Hero is set to buy 26% in Hero Honda for Rs 4,500 crore, which will raise the group’s stake in the company to 52%.
Currently, the Munjal family owns 26% stake through Hero Investments and Bahadur Chand Investments, which holds 8.67%.A report from ratings agency Crisil said Hero Investments planned to raise up to Rs 3,700 crore in short-term debt and 800 crore in long-term debt. “Total debt in HIPL is to be capped at Rs 4,500 crore initially. Post equity infusion from private equity investors, total debt at HIPL to be capped at 8 billion,” said the credit rating report, which lists the key covenants that HIPL has agreed to comply with.
The shares will be kept as collateral till the Hero Group retires the debt, which will be raised through non-convertible debentures (NCDs) expiring in threemonths . Lenders, including mutual funds, are asking HIPL to pledge shares worth 1.5 times the money it is raising through debt, said a top official in one of the mutual funds, which is negotiating to invest in the short-term paper.
HIPL would thus have to pledge shares worth 5,250 crore, if it were to raise Rs 3,500 crore. The value of Hero Investments’ 17.33% stake, as per Hero Honda’s closing price on Friday is about Rs 5,100 crore. A Hero spokesperson did not respond to an email query. He was not reachable on his mobile phone and did not respond to a text message. The debt will enable the group buy Honda’s 26% stake in bike maker Hero Honda till private equity firms bring in the money.
ET reported in its February 25 edition that Bain Capital and the government of Singapore’s investment arm are funding the group to the extent of 3,900 crore to buy the Japanese automaker’s stake in Hero Honda. The private equity firms would together own 13% in Hero Honda after this deal. “The group is raising debt because funds from private equity firms will take atleast a couple of months and Honda is wanting an early exit,” said a top official with a mutual fund who was approached to raise the short-term debt. Hero is set to buy 26% in Hero Honda for Rs 4,500 crore, which will raise the group’s stake in the company to 52%.
Currently, the Munjal family owns 26% stake through Hero Investments and Bahadur Chand Investments, which holds 8.67%.A report from ratings agency Crisil said Hero Investments planned to raise up to Rs 3,700 crore in short-term debt and 800 crore in long-term debt. “Total debt in HIPL is to be capped at Rs 4,500 crore initially. Post equity infusion from private equity investors, total debt at HIPL to be capped at 8 billion,” said the credit rating report, which lists the key covenants that HIPL has agreed to comply with.
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