Hero MotoCorp Ltd. (HMCL), India’s biggest motorcycle maker, is in talks with bankers about buying Ducati Motor Holding SpA as it seeks technology to enhance its bikes and expand its business globally.
“Lots of people have been coming to us with Ducati: Not one banker but many bankers,” Pawan Kant Munjal, the managing director of Hero MotoCorp, said yesterday in an interview in New Delhi. “We’re talking to a lot of people. Not just Ducati, whoever comes to us, we talk to them.”
Hero, which in December 2010 decided to exit a 26-year partnership with Honda Motor Co. (7267), is looking to gain technology through partnerships and acquisitions after that licensing relationship ends in 2014. The company has cash reserves of about $1 billion, Munjal said.
Investindustrial SpA, the Milan-based private-equity firm that owns Ducati, may hold an initial public offering of the luxury-motorcycle maker in Hong Kong this year or sell it to a rival, two people familiar with the plans said last month, declining to be identified because the plans are private. A spokesman for Investindustrial wasn’t immediately available to comment late yesterday.
Motorcycle makers Hero and Bajaj Auto Ltd. (BJAUT) are looking to expand their markets amid increased competition in the world’s second-biggest motorcycle market as the Indian units of Honda, Yamaha Motor Co. and Suzuki Motor Co. expand capacity in the country. Only China buys more motorcycles.
Motorcycle sales in India grew 15 percent in 2011 to 9.95 million units, according to data from the Society of Indian Automobile Manufacturers. The industry body expects deliveries of two-wheelers, including motorcycles and scooters, in the year beginning April 1 will increase 11 percent to 14 percent, it said Jan. 10.
Hero is looking to begin sales in Africa and Latin America this year as it tries to mimic the strategy of its nearest domestic rival, Bajaj Auto. Bajaj sells more than 35 percent of its products overseas and expects to exceed its export target of 1.5 million units in the year ending March 31.
Hero aims to export 1 million units annually in five or six years, Munjal said.
“We’ve been seen as a utility-bike maker, fuel-efficient bikes, and somebody who’s at the lower level of the market, who’s more small-town and rural-market focused,” said Munjal. “So our ambition is to become one of the biggest global two- wheeler players and to do that, you cannot only be in one small segment.”
Honda is expanding its operations in India after separating from Hero, and will spend as much as 10 billion rupees ($202 million) on its third factory near Bangalore in southern India that will be ready in 2013, the company said in August. When complete, Honda will have a capacity to build 4 million two-wheelers in India annually.
To contact the reporter on this story: Siddharth Philip in Mumbai at firstname.lastname@example.org
To contact the editor responsible for this story: Young-Sam Cho at email@example.com