The Indian Ministry of Corporate Affairs (MCA) has launched an investigation into Hero MotoCorp, one of India’s largest two-wheeler manufacturers. The probe centres on alleged corporate governance issues and concerns over the true ownership of several linked companies, including Salt Experiences and Management Private Limited (SEMPL), which is believed to be connected to Hero MotoCorp. The investigation has been initiated under the ‘public interest’ clause of the Companies Act. According to sources, allegations of shell companies being formed by Hero MotoCorp lies at the heart of the investigation, with the Registrar of Companies previously identifying the need for a thorough investigation into the affairs of both Hero MotoCorp and SEMPL.
The probe follows months of speculation over the financial conduct of several leading Indian companies. The government has already acted against Reliance Communications and delisted Dewan Housing Finance Corporation. Hero MotoCorp recorded a net profit of INR2,247 crore ($318m) in Q1 2021, representing a significant upturn from the INR649 crore loss it sustained in the same quarter in 2020. Hero MotoCorp’s sales of two-wheelers also surged by 178% year-on-year, demonstrating the company’s financial stability despite the ongoing COVID-19 pandemic.
The Indian auto industry has been experiencing a mixed performance of late as the country grapples with the pandemic. Hero MotoCorp’s sales have been gaining market share at the expense of other players, including Honda. In June, Hero MotoCorp unveiled its ambitious expansion plans in India and other international markets. For the remainder of the fiscal year, the two-wheeler manufacturer hopes to meet the rising demand for personal mobility and the ongoing need for socially- distant transportation. It remains to be seen whether the MCA investigation will impact these plans or the company’s future financial performance.
