Today, the Enforcement Directorate (ED) intensified its money laundering investigation against Pawan Kant Munjal, CMD & Chairman of Hero MotoCorp Ltd, by seizing three immovable properties located in Delhi. The assets, worth Rs. 24.95 crore, were attached under the Prevention of Money Laundering Act (PMLA), 2002. This action has brought the total seizure value related to this case to approximately Rs. 50 crore.
The ED's actions follow a complaint by the Directorate of Revenue Intelligence accusing Munjal of illegal foreign exchange dealings. The allegations suggest that Munjal managed personal overseas expenses by using an event management company to secure foreign exchange under different names, thus circumventing the Liberalised Remittance Scheme's annual limit per person. This currency was then given to Munjal's relationship manager, facilitating covert transportation of funds for personal expenses abroad, exceeding the limits set by the scheme.
Furthermore, on August 1, following a DRI prosecution complaint, ED investigated Munjal for exporting Rs 54 crore in foreign currency from India illegally under section 135 of the Customs Act, 1962. Munjal orchestrated a scheme involving an event management company drawing currency in employees' names, which a relationship manager then used for Munjal's personal and business trip expenses, thus circumventing the Liberalised Remittance Scheme's USD 2.5 Lakh annual limit per person. ED's search operations led to the seizure of assets valued at Rs 25 crore.
In response to these developments, Hero MotoCorp's shares fell by 1.70% to Rs. 3,120.05.
Earlier in August, an ED search operation resulted in the confiscation of valuables and digital evidence worth Rs. 25 crore from Munjal and related parties.
In a separate legal issue, on Thursday, November 9, 2023, the Delhi High Court stayed criminal proceedings against Hero MotoCorp and its officials. The court case revolves around alleged forgery of bills amounting to Rs. 5.9 crore to secure a tax credit of over Rs. 55 lakh. These proceedings have been deferred until December 6.
Earlier this month, following a role separation at Hero MotoCorp, Munjal voluntarily took a 20% salary cut despite an 18.02% increase from the previous year. This decision reduced his FY23 remuneration to around Rs. 80 crore, in stark contrast to the median employee remuneration of Rs. 12.25 lakh at the company.
InvestingPro Insights
In light of recent events surrounding Hero MotoCorp, InvestingPro has some key insights that may provide a broader understanding of the company's financial health. According to InvestingPro data, Hero MotoCorp holds more cash than debt on its balance sheet, which could provide a safety cushion in these turbulent times. Additionally, the company has maintained dividend payments for 23 consecutive years, demonstrating a commitment to returning value to shareholders.
InvestingPro Tips further highlight that Hero MotoCorp yields a high return on invested capital and operates with a high return on assets. These factors indicate a strong operational efficiency and effective use of capital, which may be of interest to potential investors.
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