The owner of Hero Group is set to buy Honda Motor's 26% stake in joint venture Hero Honda for about USD 1 billion rupees or half the current market value.

The first phase of the two-tiered deal, likely to be announced before Christmas, will see Munjals acquire the foreign partner's stake through a special purpose vehicle (SPV) by raising a bridge loan, said media reports.

The Munjals will divest 60% to 70% stake in this SPV to a group of two to three private equity firms to pay back the loan, adding Carlyle, Kohlberg Kravis Roberts & Co, TPG, Bain Capital and Warburg Pincus in the fray.

However, the officials at the Hero Group, Honda Motor, and the private equity firms could not immediately be reached for comment.

The largest two-wheeler maker, Hero Honda registered a sales growth of 10.48 percent in the month of November. The company sold 421,366 units compared to the 381,378 units sold in November 2009. Thus recording 400,000 plus units' sales for seventh consecutive months. Hero Honda had sold 505,553 units in October 2010.

The motor cycle maker has an installed capacity of 50 lakh units per annum at its three facilities at Dharuhera and Gurgaon in Haryana and Haridwar in Uttarakhand.