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Thread: Hero Honda to pay 45 bn yen to Honda for licencing till 2014

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    Rusted Rony's Avatar
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    Arrow Hero Honda to pay 45 bn yen to Honda for licencing till 2014

    29 Apr, 2011, 03.14PM IST,PTI

    NEW DELHI: India's largest two wheeler-maker Hero Honda will pay Honda 45 billion yen (about Rs 2,450 crore) till 2014 as part of a new licensing agreement signed between the Hero Group and the Japanese auto major after deciding to part ways on their joint venture.

    Hero Honda Motors Ltd (HHML) said the amount is in line with its existing rate of royalty payment, which is about 2.7 per cent to 2.8 per cent of net sales. For the existing products, the Indian group will stop paying royalty by June, 2014, it added. "Honda and HHML have signed a new licencing agreement, which enables HHML to continue producing, selling and servicing its current products. Consideration for the licensing agreement was JPY 45,000 million and becomes due through 2014," Honda Motor Co said in a statement. Last December, the Hero Group and Honda had agreed to end their 26-year-old relationship, with the Indian partner agreeing to buy out Honda's 26 per cent stake in Hero Honda for Rs 3,841.83 crore.

    When contacted, HHML Chief Financial Officer Ravi Sud said the amount to be paid to Honda till June, 2014, does not reflect any increase in royalty payment. "Hero Honda has been paying royalty to Honda at around 2.7 per cent to 2.8 per cent of net sales and it will remain the same even in future," Sud told PTI. The royalty payment will gradually taper off from about 2.75 per cent now to 2.2 per cent by 2014 and after that for the existing products, the Hero group will not pay any royalty for the existing products, he insisted. "Even for new products, which we may get from Honda after June, 2014, the royalty will be in line with what we are paying today," Sud said.

    Shares of Hero Honda were trading 0.95 per cent down at Rs 1,680 apiece on the Bombay Stock Exchange in the late afternoon today.

    Source : Hero Honda to pay 45 bn yen to Honda for licencing till 2014 - The Economic Times
    Last edited by Rony; 04-29-2011 at 06:23 PM.
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    News approved.
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    Default From moneycontrol.com....

    Royalty payments to Honda will continue till June 2017. Hero Honda spoke exclusively to CNBC-TV18's Swati Khandelwal Jain and clarified that while the existing royalty payments, till 2014, will be paid in three instalments with the total amounting to Rs 2,500 crore. And then there will be the royalty payments on new models till 2017.
    Hero will pay royalty payment to Honda on both existing and new products. The two companies had earlier agreed that Hero will pay approximately Rs 2,500 crore over a period of three-and-a-half years till June 2014 irrespective of the sales volumes. This actually amounts to close to about Rs 670 crore per year. Post that Hero will not pay any royalty on existing products to Honda.
    Furthermore, Hero is expected to get about 10 products from Honda in a period of two years and most of these will come in starting FY12 and FY13. Now importantly on this, the royalty payments will be based on the previous formula, which used to be based on the sales volume. We understand that it will be close to about Rs 30 crore per year. In percentage terms, this comes up to 3-5% per model. This is of course over and above the Rs 2,500 crore of royalty being paid on existing products

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    Furthermore, Hero is expected to get about 10 products from Honda in a period of two years and most of these will come in starting FY12 and FY13. Now importantly on this, the royalty payments will be based on the previous formula, which used to be based on the sales volume.
    Even I read the news that HH is trying to license the Twister's engine and frame for themselves, in Bike India.
    But this line puts me in doubt. Honda will license 10 products?? This means some imported engines would also be there, because Honda doesn't have ten products in their line up?

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    So hows does this matter to a consumer of HH bikes?
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    Quote Originally Posted by haxor View Post
    So hows does this matter to a consumer of HH bikes?
    It matters a lot, b'cos many perceptions and assumptions are going into minds of people b'cos of divorce, this news shows that HH is doing legally what is necessary to keep the continuity of business and ensuring comsumers get seamless service they have been getting all these days, even if it means paying huge sum of money.

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    thats too much money involved................

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