INDIA BUSINESS WORLD - OCTOBER 2006
THE MONTH THAT WAS...

HONDA GETS NOC FOR HOLDING FIRM

 The Munjals of Hero Honda have given a no-objection certificate (NOC) to Japanese joint venture partner Honda for its proposed new holding company in India — Honda Motor India. This puts to rest speculation over whether Honda's application to the Foreign Investment Promotion Board (FIPB) for the new subsidiary has got entangled in the Press Note 1 controversy.

   Hero Honda finance veep Ravi Sud said: “The NOC from the three partners (Hero Cycle, Hero Investments and Bahadur Chand Investments) in Hero Honda has been given in the first week of October.” Sources say, with the NOC in place, the application should now go through.

   According to industry sources, the speculation was triggered off by the fact that FIPB had deferred Honda's application around three weeks ago for want of the NOC.

   BUTwith the NOC in place, the case was once again taken up in FIPB's meeting on October 20, though the board's decision has not yet been announced.

   Honda sources said the objective of the new holding subsidiary, which will be headed by Honda Siel president M Takedagawa, is to “synergise and centralise certain critical functions of Honda companies in India, starting with spares”. Once the FIPB approval comes along, the three Honda subsidiaries — Honda Siel, Honda Motorcycle and Scooter India and Honda Siel Power Products — will immediately come under the holding company. As for Hero Honda, sources said if and when it joins is up to the company. Hero Honda, where both Honda and the Munjals own 26% stake, is the only Honda subsidiary in India where the Japanese company does not have a majority share.

   Sources say the NOC from the Munjals currently makes it clear that Hero Honda will not come under the new holding company. “The NOC is along the lines that initially the new company will have nothing to do with Hero Honda; so the Munjals have no objection to it,” says a Honda source. However, in future, if the merits of the synergy impress the Munjals, they have the right to join in, he added.