Hero Cycles to set up 2 new plants, invest Rs 200 crore by 2014

Hero Cycles to set up 2 new plants, invest Rs 200 crore by 2014 New Delhi: Hero Cycles on Friday said it will set up two new plants by 2014 entailing an investment of up to Rs 200 crore and is also close to picking up stake in two firms in Europe as part of its international expansion.

"We are setting up a new plant in Bihar, which will be operational be January 2014. This will be followed by another at Mangli in Ludhiana in the same year. The total investment one these two new plants will be around Rs 170 crore to Rs 200 crore" Hero Cycles Co-Chairman and Managing Director Pankaj Munjal told reporters here.

The two new plants will have installed capacities of one million cycles per annum each, he added.

"Currently our existing plant at Ludhiana has a capacity of six million units. The two new plants will manufacture cycles to cater to our export markets," Munjal said.

Commenting on the company's international expansion plans, Munjal said: "Strategic equity alliances in Europe will happen soon. We are looking for equity investments and are currently in talks with two firms there. We want to be local players there."

The equity investments could be creeping acquisitions or buying a chunk at one go depending on the outcome of ongoing negotiations, Munjal said without disclosing further details.

When asked what was the size of war chest that the company has prepared for the acquisitions he said: "Hero has a cash reserve of Rs 600 crore to Rs 700 crore, although we may not necessarily use all of that in the acquisition."

Hero Cycles' focus within Europe will be the big markets of Germany and France, he added.

On the domestic front, the company is giving its distribution network a new identity with the opening of its flagship retail store 'HeroOne' in South Delhi.

Traditionally Hero Cycles sells its products through dealers and multi-brand retail outlets and is now expanding through exclusive franchise dealer network.

"Going forward we plan to come up with multiple stores in different cities across India," Munjal said.

The company has set a target of opening 200 'HeroOne' stores during this ongoing fiscal.