Munjals pledge shares to fund buy

MUMBAI: Hero Investments Private Limited has pledged the company’s entire 17.33% shareholding in Hero Honda in order to bridge finance its buyout of Honda’s 26% stake in the joint venture. Munjals of Hero currently hold 26.1% stake in Hero Honda.

According to a statement issued to the Bombay Stock Exchange, Hero Investment has pledged 1.07crore shares representing 5.4% of stake in Hero Honda with Axis Trustee Services, 1.19 crore shares with IDBI Trusteeship Services and another 1.19 crore shares with IL&FS Trust Company.

The Munjals, who control a large part of their investment in Hero Honda through Hero Investments, have issued short-term debt to fund the Rs 3,841crore purchase of shares of Hero Honda from its JV partner Honda Motor Corporation of Japan. Insurance companies, NBFCs and mutual funds have bought the short-term bonds which has been arranged by Kotak Mahindra Bank.

The Munjals plan to fund the acquisition of Honda’s shares by selling shares worth upto Rs 4,500 crore to private equity investors Bain Capital LLC which manages $65 billion worth assets and Government of Singapore Investment Corporation (GIC). Bain Capital has agreed to pick up 70% of the investment and the balance 30% will be held by GIC. However, the private equity investments can come in only after the Cabinet Committee on Economic Affairs clears the deal.

To fund the deal till the PE investment is approved, Honda Investment has sought to raise funds through short-term debt. Hero Investment Corporation is buying the shares at a sharp discount to the market price. As against Tuesday’s closing price of Rs 1,518, the acquitision is taking place at an agreed price of Rs 740 per share.