Government Inquiry Finds No Violations at India’s Largest Two-Wheeler Manufacturer
The Ministry of Corporate Affairs (MCA) has officially cleared Hero MotoCorp of any violations related to corporate governance or fund diversion, nearly two years after launching an investigation into the country’s leading two-wheeler manufacturer. Sources familiar with the matter confirmed that the ministry’s final report found no evidence of financial mismanagement or governance breaches, effectively exonerating the company from previous allegations.
“No further action has been suggested. The investigation report has almost given a clean chit to the automobile manufacturer. Violation of corporate governance norms and fund diversion is not there in the findings of the report,” a source told Moneycontrol.
Background: Allegations That Led to the Probe
Hero MotoCorp came under scrutiny in March 2022 when the Income Tax Department conducted searches at multiple premises linked to the company. The raids were part of a broader investigation into alleged tax evasion, raising concerns about financial irregularities and prompting a deeper inquiry.
In June 2023, the MCA formally ordered an investigation into Hero MotoCorp’s corporate governance standards, ownership structure, and possible fund diversion. The probe was initiated following reports of potential financial mismanagement, which had raised red flags among regulators and investors.
Findings of the MCA Investigation
The ministry’s extensive review of Hero MotoCorp’s financial records and business practices found no wrongdoing. The final report concluded:
- No Breach of Corporate Governance Norms – The company adhered to all required governance standards, and no evidence of regulatory violations was found.
- No Fund Diversion – Investigators did not identify any misappropriation of funds or fraudulent financial activities.
- No Further Action Recommended – The report does not suggest any penalties or additional probes against the company.
The conclusion of this investigation provides much-needed relief to Hero MotoCorp, whose corporate image had been under the scanner since the allegations surfaced.
Despite facing regulatory scrutiny, Hero MotoCorp has continued to post strong financial results, further solidifying its dominance in the Indian two-wheeler market.
Record Profits and Sales Growth
For the December 2023 quarter, Hero MotoCorp reported:
- Net Profit Growth – A 12% year-on-year increase in net profit, reaching ₹1,203 crore.
- Highest-Ever Quarterly Retail Sales – Festive-season demand boosted sales to record levels.
- Market Share Expansion – Strengthened its leadership in the 100cc segment with Splendor and gained traction in the 125cc category with Xtreme 125R and Super Splendor.
- Electric Vehicle (EV) Growth – Continued momentum in the EV segment, positioning Hero MotoCorp as a key player in the evolving two-wheeler market.
The company’s international business also showed strong growth, particularly in Bangladesh and Colombia, where it outpaced industry expansion.
Hero MotoCorp’s Strategic Investments and Sustainability Initiatives
In line with its long-term sustainability and growth strategy, Hero MotoCorp’s board recently approved a ₹5.15 crore investment in a solar power wheeling project for its manufacturing plants in Dharuhera and Gurugram under the group captive mechanism. This initiative is expected to enhance the company’s sustainability efforts and reduce its carbon footprint.
Stock Market Reaction
Despite the positive regulatory outcome, Hero MotoCorp’s stock showed a slight dip in early trading.
- Stock Performance on NSE – At 11:46 AM, Hero MotoCorp shares were trading at ₹3,630.95 on the National Stock Exchange (NSE), down 0.59% from the previous close.
- Investor Sentiment – The minor decline could be attributed to broader market trends rather than the MCA’s findings.
Industry analysts expect the removal of regulatory overhang to improve investor confidence in Hero MotoCorp’s long-term growth prospects.