Gujarat Special: Hero MotoCorp yet to wrap up land acquisition in Halol

When completed, the Gujarat plant will have an initial capacity of 1.2 million units, later to be upped to 1.8 million units in the second phase, says Shobha Mathur.

When Hero MotoCorp announced its plans of investing Rs 1,100 crore in its proposed fifth plant at Gujarat, it seemed to have scored a brownie point over rival Honda Motorcycle & Scooter India by tying up for the most happening destination, ahead of it. The plant that is coming up at Halol in Gujarat, which is also home to General Motors India, is yet to commence construction activity. According to the original production schedule, the plant was to go on stream in the second quarter of 2013-14. Acquisition bottlenecks seem to have cropped up with Hero claiming that full allotment of land is yet to be made. “We have been allotted part of the land for which payment has already been made. We are awaiting the allotment of the remaining parcel of land, post which we plan to start work on the project,” says a company spokesperson.

State government officials when contacted confirmed that 215 acres were allotted to Hero last June and some spadework is currently in progress at the site by the company after its acquisition. “Hero has paid Rs 60.98 crore for the land.” Delays have also set in on other projects that were announced by PawanMunjal, managing director and CEO last June. He had spoken of an investment of Rs 2,575 crore for expanding capacity at Hero’s existing plants, plans for setting up two new plants, one at Neemrana in Rajasthan and the other at Gujarat as well as an integrated technology and R&D Centre at Kukas in Jaipur. The Neemrana plant was to kick off production in Q1 of FY’14 but has spilled over. The two-wheeler maker says it has earmarked a capital expenditure of Rs 1,100 crore for FY'14, of which Rs 600 crore will be spent on setting up its fourth plant and the Global Parts Centre (GPC) – construction of which is currently underway at Neemrana. An amount of Rs 100-150 crore will be invested on the new integrated R&D centre at Kukas, construction of which will commence soon.

Sources say that the economic slowdown has applied the brakes on the company’s expansion plans. Moreover, domestic sales slipped by 2.16 percent at 5,912,538 units in 2012-13 as per SIAM data and labour problems at its Gurgaon facility kept the pressure on. In a company statement, Anil Dua, senior vice-president (Marketing & Sales) said: “The Indian auto industry faced an acute slowdown in 2012-13. It continues to reel under the adversities of persistent inflation, firm interest rates, rising fuel prices and negative consumer sentiment.

All these factors have adversely impacted the growth of the industry and our sales volumes.”

Capacity build-up
However, when Hero’s new Gujarat plant goes into production, it will have an installed capacity of 1.2 million units per annum in the first phase. The second phase will see this number rise to 1.8 million providing direct employment to over 2,000 people. For Hero MotoCorp, the two new plants will help augment its total installed capacity to nine million units in two years, which is in line with the company’s objective of reaching 10 million units in the next five years from the current 6.9 million. Exports will contribute 10 percent of this and in line with its overseas plans, the company has begun exports to new markets of Central and Latin America as well as Africa with 30 countries across various geographies on its radar. Colombia is currently the only country in Latin America where Hero MotoCorp exports its products. Other international markets where two-wheelers of Hero MotoCorp are sold include Sri Lanka, Bangladesh and Nepal.