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* Funds to help finance buyout of Honda stake in JV

* Plans dual-tranche bond issue, to raise entire fund next wk

* Mutual funds likely to be key investors in the issue

India's Hero Group will raise 34 billion rupees ($749 million) in debt to fund part of its planned buyout of Honda Motor's (7267.T) stake in their joint venture, a person with direct knowledge of the matter said on Thursday.

An arm of the Hero Group will raise funds through a dual-tranche bond issue that will hit the market next week after coupon rates are finalised this week, the source told Reuters.

The dual tranche issue will raise 29 billion rupees in 3-month maturity and 5 billion in one-year maturity.

The 3-month bonds are rated P1+, the top rating for short-term bonds, and the 12-month tranche is rated AA by CRISIL, the source said, adding, mutual funds are likely to be the key investors in the bonds.

Hero Group announced in December its plan to buy the Japanese firm's 26 percent stake in their motorcycle joint venture, Hero Honda Motors, which is India's largest maker of two-wheelers. The stake then had a market value of nearly $2 billion.

Media reports had said unlisted Hero Group will sell a minority stake in Hero Honda to private equity investors to fund part of its purchase of Honda's stake in the business.

A Hero Honda spokesman did not return calls seeking comment and a spokesman for Hero group could not immediately be reached for comment.

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