Hero Honda Motors, India's largest motorcycle maker, would invest Rs 200 crore (Rs 2 billion) to set up a third plant by the end of 2004 and hire a workforce of 600.

"We will pump in Rs 200 crore to establish our third plant. Initially, we will hire a workforce of 600," its chairman Brijmohan Lall Munjal said on the sidelines of a news conference in New Delhi.

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Hero Honda Motors has two existing plants in Daruhera and Manesar, both in Haryana.

"We have done a part of feasibility study and identified four states to zero down on one for the plant. The four states are Tamil Nadu, Rajasthan, Maharashtra and Karnataka," he said.

The plant should be ready by the end of this calendar year with an initial capacity of 200,000-300,000 units annually.

Asked whether the company would borrow the money to fund its proposed plant, Munjal said: "We have huge cash reserves. We do not borrow."

The issue of the third plant has been hanging fire since almost two years as motorcycle sales decelerated a bit during 2002-03, largely due to deficient monsoon and the imbroglio over the implementation of value added tax regime.

Motorcycle sales, however, started picking up since the second quarter of the last fiscal due to bountiful monsoon and readily available low interest rate loans.

At present, the two plants produce 2.6 million motorcycles.