The Indian Ministry of Corporate Affairs has reportedly ordered a probe into Hero MotoCorp to examine its association with an external vendor regarding alleged fund diversion.
The objective of the investigation, conducted in the "public interest," is to evaluate the Hero MotoCorp ownership structure and determine its control over the third-party vendor, cited two undisclosed government sources to Reuters.
The decision to proceed with a formal investigation was made after India's Registrar of Companies conducted a preliminary interview, indicating that the case was deemed significant enough to warrant further examination in the "public interest." Under legal provisions, the Ministry of Corporate Affairs now possesses the authority to interview company officials, gather documents, and carry out the investigation.
For the record, Hero MotoCorp also faced scrutiny from the Income Tax Authorities of India last year. The company clarified that its offices and the residence of CEO Pawan Munjal were inspected by officers as part of a routine inquiry.
Notably, Hero MotoCorp is the largest motorcycle manufacturer in India and one of the world's leading two-wheeler companies. It is is known for its wide range of motorcycles, catering to diverse customer needs and preferences. The company website highlights its focus on innovation, reliability, and fuel efficiency in its product lineup, while ensuring sustainable practices. It has a strong distribution network and a robust after-sales service, guaranteeing customer satisfaction.
When approached with the enquiry, the firm stated that it didn’t receive any official intimation from the government and declined to give any comments at the time. The ministry did not provide further information either.
As a result of the internal government order, Hero's shares experienced a decline of up to 4.2% during Thursday's afternoon trading session.