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CRISIL has noted the disclosures made by the direct and indirect shareholders of Hero Honda Motors Ltd (HHML, rated ‘AAA/FAAA/Stable/P1+’ by CRISIL) and the direct and indirect shareholders of Munjal Showa Ltd (Munjal Showa, ‘AA/Stable/P1+’) to the Bombay Stock Exchange and National Stock Exchange on May 19 and 24, 2010, respectively, in respect of transfer of shares between promoter companies, pursuant to a family arrangement.
As per the disclosure made by the direct and indirect shareholders of HHML, the 26 per cent stake held in HHML by the members of the Munjal family is expected to be consolidated into two investment companies, Hero Investment Pvt Ltd (HIPL) and Bahadur Chand Investments Pvt Ltd (BCIPL). The family’s holding in HHML includes the 8.7 per cent held through Hero Cycles Ltd (‘AA/Stable/P1+’), which is now expected to be transferred to HIPL. HIPL and BCIPL are in turn majority owned by a partnership firm, Brij Mohan Lall Om Prakash (BMOP).
As per the disclosure made by the direct and indirect shareholders of Munjal Showa, the 16.5 per cent stake held by Hero Cycles in Munjal Showa, along with stakes held by other investment companies and family members of the Munjal family, is being consolidated between Dayanand Munjal Investment Pvt Ltd and Mr. Yogesh Chander Munjal (eldest son of Mr. Satyanand Munjal).
The Hero Group comprises several companies with a presence largely in automobiles, automobile components, finance, bicycles, real estate, and steel businesses. The Hero Group is currently led by Mr. Brij Mohan Lall Munjal along with his brothers, Mr. Satyanand Munjal and Mr. Om Prakash Munjal, and Mr. Vijay Kumar Munjal, eldest son of late Mr. Dayanand Munjal. CRISIL has ratings outstanding on the debt programmes and bank facilities of several Hero Group companies (a list of these companies and their ratings is attached).
CRISIL’s analytical framework in assessing credit quality takes into account aspects related to ownership, governance, and management, in addition to the rated entity’s business risk and financial risk profiles. CRISIL is in dialogue with the representatives of Hero Group, to understand the likely impact of the family arrangement on the ownership, financial profile, business and growth strategies, and management structure of the rated companies. CRISIL will review its ratings if there is an impact on any of these parameters because of the family arrangement.
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Disclaimer: A CRISIL rating reflects CRISIL's current opinion on the likelihood of timely payment of the obligations under the rated instrument and does not constitute an audit of the rated entity by CRISIL. CRISIL ratings are based on information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the information on which the rating is based. A CRISIL rating is not a recommendation to buy, sell, or hold the rated instrument; it does not comment on the market price or suitability for a particular investor. All CRISIL ratings are under surveillance. Ratings are revised as and when circumstances so warrant. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this product. CRISIL Ratings’ rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For the latest rating information on any instrument of any company rated by CRISIL, please contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (+91 22) 3342 3000.
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