Have signed new licensing agreement with Hero: Honda Motors
Honda has announced that it would receive 2,500 crore by 2014 as part of its new agreement with Hero Honda.
April 29, 2011 / 16:43 IST
Honda Motors' FY11 results press release has shed more light on the dissolution of its joint venture with the Hero Group.
Honda has announced that it would receive Rs 2,500 crore by 2014 as part of its new licensing agreement with Hero Honda. Hero Group's royalty payment may now be Rs 830 crore per year for three years. Earlier, Hero Group had indicated royalty would be 3% of sales and would be Rs 600 crore per year. Hero may now see annual outgo at Rs 830 crore per year, which may now translate into a royalty at 3.7% of sales. The Indian 2-wheeler maker will have to pay for producing, selling and servicing current products. It is to be noted that Hero Honda will pay the amount irrespective of the sales from the products.Higher royalty would lower FY12 expected earnings per share by Rs 7. Consensus EPS estimates for FY12 stand at Rs 111 and for FY13 at Rs 126.Hero Group had paid Honda Rs 740 per share for 26% stake it acquired on March 22. The company said that the transaction price of Rs 740 per share is based on economic rationality. Honda, Toyota not big players in Indian auto market: Expert Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
