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B M Munjal to ride Hero Honda under family pact

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B M Munjal and his sons will hold the stake as Indian promoters in the country's largest two-wheeler maker Hero Honda as part of the family settlement of $4.2-billion Hero Group.

The agreement to divide the Group was reached last week and was based on a simple principle of ending the numerous cross holdings between the families of B M Munjal and his three brothers -- O P Munjal, Satyanand Munjal and Late Dayanand Munjal.

 

Reliable sources said it is only a mere ending of cross holdings in the companies in order to keep the businesses running smooth when it will be handled by future generation.

"It seems like an intelligent move as all the family members would get significant businesses to run," a source in the know of the development said.

As a result, the financial companies on behalf of B M Munjal and his sons -- Suman, Pawan, and Sunil, will hold 26 per cent stake in Hero Honda, a joint venture where Japanese Partner Honda Motor Co holds another 26 per cent and the balance is with public and financial institutions.

The Hero Group, which officially came into existence in 1956, had started its activities in early 1940s as a bicycle maker by the four brothers.

The group currently has over 20 firms, most of which are related to the two-wheeler industry.

"As part of the realignment process, all promoter cross holdings have been untangled and consolidated in the name of the relevant family. The new arrangement has resulted in ownership transfer to the four family groups, and has completely eliminated cross-holdings," the group had said in a statement.

After the settlement, Hero Honda, Hero Corporate Services, Rockman Cycles Industries, Hero Mindmine Institute, Easy Bill and Hero Management Service is going to family of B M Munjal.

Satyanand Munjal's family is getting Munjal Showa, Munjal Auto, Highway Industries, Majestic Auto and Satyam Autotech.

While other entities such as Hero Cycles, Hero Motors and Munjal Sales Corporation are earmarked for O P Munjal, the members of late Dayanand Munjal, represented by his son Vijay Munjal will now be the owners of Hero Exports, Hero Electric, Hero Cycles (Unit II) and Sunbeam Auto.

The statement had said: "All existing management and control structures in the respective group entities have been retained with the respective families along with the ownership. Only the holding structure (equity and board) of these operating entities have undergone realignment."

The Munjals' quiet settlement is in contrast to the bitter separation saga of India's some prominent business families, like the Ambanis and the Bajajs.

"In line with the basic realignment premise, there will be absolutely no change in the manner in which the group companies will be run and managed from here on. There has been no disruption in the business entities or in the manner in which they function and deal with each other," it had added.

Regarding the holding structure of Hero Honda, the company in its recent stock exchange notifications had stated that Suman Kant Munjal, the second son of group Chairman B M Munjal, has consolidated 26 per cent stake in the company through two investment firms -- Hero Investments (HIPL) and Bahadur Chand Investments (BCIPL) by inter se transfer of shares among promoters.

Sources, however, pointed out that post the Munjals' settlement that untangled all cross holdings of four families of the group, there has also a change in ownership of HIPL and BCIPL, thereby resting equal ownership of the 26 per cent stake in Hero Honda with the family of B M Munjal.