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Honda to Sell Stake in India Venture, Nikkei Reports

Dec. 16 (Bloomberg) -- Honda Motor Co.’s board approved the sale of as much as 100 billion yen ($1.2 billion) of shares in Hero Honda Motors Ltd., India’s biggest motorcycle maker, Nikkei reported, without saying where it got the information from.

The company will probably make an official announcement about selling the stake later today, the newspaper said on its website. Akemi Ando, a Honda spokeswoman in Tokyo, declined to comment. Pawan Kant Munjal, Hero Honda’s managing director, didn’t answer calls to his mobile phone. The motorcycle-maker will meet the press at 4 p.m. in New Delhi, Bloomberg UTV said, citing people it didn’t identify.

Paring ties with Hero Honda may free Tokyo-based Honda from restraints included in the venture agreement, as it works to build up a fully owned unit in the world’s second-biggest two-wheeler market. Hero Group’s Munjal family and private equity funds could buy part of Honda’s 26 percent stake in the motorcycle-maker, five people with direct knowledge of the situation said in September.

“Once they part ways with Hero, Honda will be able to launch a more extensive range of motorcycles,” said Vaishali Jajoo, an analyst with Mumbai-based Angel Broking Ltd. Hero Group may face a long-term challenge maintaining market share without a technology tie-up “as their products will be untested and customers are very cautious about such things,” she said.

Hero Honda, based in New Delhi, rose 1.4 percent to 1,644 rupees at 2:17 p.m. in Mumbai trading. Bombay Stock Exchange’s Sensitive Index rose 0.4 percent.

Honda Partnership

Honda and Hero Group, based in New Delhi, formed Hero Honda in 1984. Honda, the world’s biggest motorcycle-maker, set up fully owned Honda Motorcycle & Scooter India Pvt. in 2001. The unit initially only sold scooters, before adding motorcycles. Honda has invested 8 billion rupees ($176 million) in the unit’s factory, according to the local company’s website.

Vibhuti Dimri, a spokeswoman for Honda Motorcycle & Scooter India, didn’t answer calls to her mobile phone.

The unit’s India sales grew 44 percent in the eight months ended November to 1.03 million, compared with Hero Honda’s 13 percent increase to 3.36 million, according to the Society of Indian Automobile Manufacturers. The overall two-wheeler market rose 28 percent to 7.68 million.

To contact the reporters on this story: Subramaniam Sharma in New Delhi at ssharma@bloomberg.net; Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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