Hero MotoCorp to invest Rs 5,000 cr to raise global output

India's largest two-wheeler maker Hero MotoCorp plans to invest Rs 5,000 crore in manufacturing plants, including in Colombia and Bangladesh, as well as new facilities at Gujarat and Andhra Pradesh as it targets 12 million annual production capacity by 2020.

The company, which will formally inaugurate its plant in Neemrana on Tuesday, plans to enter Europe by the end of next year.

"We have lined up total investment of over Rs 5,000 crore across the globe including manufacturing plants in Colombia and Bangladesh and the new plants coming up at Gujarat and Andhra Pradesh and the Hero Global Centre for Research & Design at Kukas in Rajasthan," Hero MotoCorp Vice Chairman and Managing Director Pawan Munjal in Neemrana.

The company has invested Rs 1,000 crore at the Neemrana facility and has also started work on the Colombia plant. The work on Bangladesh facility will begin soon, he added.

"By November, we will start work on the Halol plant in Gujarat that will be followed very soon at the Andhra Pradesh plant. We won't wait for Gujarat plant to come up for setting up the plant in Andhra Pradesh," Munjal said.

The Gujarat plant will have an annual capacity of 1.8 million units while the Colombia and Bangladesh will have 1.5 lakh units each annually, he added.

The plant at Andhra Pradesh will also have an annual capacity of 1.8-2 million units.

The company plans to invest Rs 653 crore at Kukas, Rs 1,600 crore each at Andhra Pradesh and Gujarat plants, Rs 200 crore at Colombia plant and Rs 100 crore on the Bangladesh facility, Munjal said.

"The Bangladesh plant will be used to cater to domestic demand as well as cater to neighbouring countries such as Myanmar and may also even supply to the neighbouring Indian states from there," he added.

Elaborating on entry in the European market, Munjal said: "We could enter Europe possibly toward the end of 2015. We are looking to launch the hybrid scooter Leap there in Western Europe first".

He added that the company is in the process of homologating its products for the US market.

"We are expecting to enter there by 2016," Munjal said.

Commenting on the domestic market, Munjal said the company is targeting to achieve 50 per cent market share.

"We would like to have 50 per cent market share, which we don't have today. Scooter is a fast growing segment but due to capacity constraints we could not increase our market share. So with the fresh capacities coming in, we will be able to cater to the demand for scooters, which will also bring numbers for us besides motorcycles," he added.

Hero MotoCorp scrip closed at 2,936.90, up 2.08 per cent, on the BSE.

Munjal, however, did not provide timeframe for reaching the 50 per cent market share in the domestic market.

On new products, he said the company will launch two scooters and also has an engine for motorcycle currently under development that could be launched next year.

"By the end of Q2 of 2015, the company is looking to launch a higher cc bike in the 250cc and above category," he added.

When asked if the company is looking for global sports sponsorships like it has done in Indian Super League, he said: "Absolutely. The company is going global and the brand is going global."

To create awareness at a global level, the company and the brand needs to associate with sports and allied activities that Hero is related with, he added.

"There is nothing concrete in hand right now but say in markets like South America where football is very popular, we could have partnerships with a local club of sports personality," he said.

The Neemrana plant, with an annual capacity of 7,50,000 units per annum, will produce the company's range of motorcycles and scooters.

Going forward, the company has plans to manufacture high-end two wheelers from this facility, Munjal said.

With the coming up of the Neemrana plant, the production capacity of the company has risen to 7.65 million units per annum, well on course to achieve the stated objective of 12 million annual capacity by 2020.

Hero MotoCorp is also set to commence construction of its 5th and 6th plant in Gujarat and Andhra Pradesh, respectively.

"When operational, all these plants, including the ones in Colombia and Bangladesh, will take the total installed capacity of the company to 12 million units of two wheelers," Munjal said.

Last year, it announced plans to enter 50 markets by 2020 with a target of 20 manufacturing facilities across the globe and an overall annual turnover of Rs 60,000 crore.

It is targeting to get 10 per cent of annual sales from export markets, at around 1 million units, by 2017.

Hero MotoCorp has set a cumulative sales target of 100 million units by 2020, having crossed the 50 million milestone last year.