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Hero forms manufacturing joint venture in Bangladesh

Tuesday, 22 April 2014 - 7:20am IST | Place: Mumbai | Agency: dna

Hero MotoCorp, India's largest two-wheeler maker, is planning to set up a manufacturing plant in Bangladesh under a joint venture with a local firm.

Hero, which sells its range of vehicles in Bangladesh through 50 outlets, would hold 55% in the JV with Nitol Niloy Group.

Both firms plans to invest $40 million (over Rs 240 crore) in next five years.

According to a company statement, the Bangladesh plant will have an annual capacity of 150,000 units and will be operational by the second quarter of fiscal 2015-16.

The company said it is aiming a 20% market share in the first year of operations.

As per the estimates, the local requirement of two-wheelers in the country is around 3 lakh units annually.

"With the setting up of the state-of-the-art world class plant here, we will bring the latest modern technology into the country. This will generate direct and indirect employment and opportunities in the country," Pawan Munjal, MD and CEO of Hero MotoCorp, said in the statement.

The company has been aggressively expanding its international footprint, post its split with Japanese manufacturer – Honda -- three years ago.

This will be its first JV outside India for a manufacturing unit.

Hero products are currently sold in 18 countries, including in regions like South America, Central America and Africa. The company has also set up assembly units in Kenya, Tanzania and Uganda in East Africa through its distributors.

Hero may also be looking at setting up another factory in Colombia, which will cater to the Latin American market.

Hero is targeting to generate 10% of its total revenue from global markets by 2016-17.

Its rival Bajaj Auto is the biggest exporter of two-wheelers from India having a significant market in regions like Africa and Latin America.

"Having a manufacturing set-up will have a cost advantage for Hero MotoCorp over Bajaj Auto," said Yaresh Kothari, analyst with Angel Broking.

Surjit Singh Arora, analyst with Prabhudas Lilladher, said, "Markets like Latin America, Saarc and Africa are largely under-penetrated, but dominated by the Chinese and Japanese manufacturers. Hence, there is a lot of scope for Indian two-wheeler companies to grow. Hero's entry into these markets will not really dent the market share of Bajaj Auto as demand for Indian products continues to grow."

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