The above headline may be cheeky referencing for the world’s second-largest motorcycle manufacturer after Honda – a company with which it fell out spectacularly in 2010 after a previously fruitful joint venture lasting 26 years. But Hero MotoCorp continues to have a torrid time with regulatory authorities in New Delhi, so perhaps “Cowboys and Indians” would be more apposite.
India’s Ministry of Corporate Affairs (MCA) recently ordered an investigation to assess Hero MotoCorp’s relationship with a “third-party vendor” in relation to the alleged improper diversion of funds. This probe into the ownership structure of Hero MotoCorp, and whether it controlled the aforementioned third-party vendor emerged from Reuters news agency sources privy to an internal government directive.
Preliminary sniffing around by the Registrar of Companies had apparently decided further formal sleuthing was necessary in the public interest. As a result, activating various legal provisions, the MCA now has powers to interrogate Hero MotoCorp executive officers and demand pertinent documentation from them on unspecified corporate governance issues.
Preliminary sniffing around by the Registrar of Companies had apparently decided further formal sleuthing was necessary
Currently, these are as clear as mud but will attract MCA scrutiny of the true ownership and affairs of both Hero MotoCorp and certain linked companies. One business under suspicion as a “linked entity” is Salt Experiences and Management Private. Hero MotoCorp, meanwhile, denied receiving any communication from the government and declined to comment. “We will provide all information if and when it is sought from us,” a spokesperson told Reuters.
The company has a history of fractious interfaces with India’s political establishment. Its notoriously aggressive Income Tax Department, often employed as a disciplinary weapon against both indigenous and foreign enterprises that don’t toe the ruling Hindu nationalist Bharatiya Janata Party line, was unleashed upon Hero in March last year.
Tax inspectors raided Hero MotoCorp offices and the homes of senior staff, including the residence of Hero chairman and chief executive Pawan Munjal. Although company PR passed the intrusions off as part of a “routine inquiry”, a subsequent Income Tax Department report identified bogus commercial expenses claims amounting to about £96m and a substantial off-radar real estate transaction, funded by company money on behalf of Munjal individually.
However, such shenanigans don’t appear to have done much harm to Hero MotoCorp’s fortunes so far. Its market capitalisation hovers around the £6bn mark. The latest full-year financial results to March 2023 reported a turnover of £3.383bn, a £377.7m operating profit and a net profit of £275.4m. In only the first two months of its current fiscal year, Hero made and sold 915,581 motorcycles and scooters. Pawan Munjal’s personal net worth stands at an estimated £2.834bn.