New Delhi, March 29 (IANS) The government Tuesday allowed infusion of Rs.4,500 crore (about $1 billion) in Hero Investments, part of the Hero group, to acquire Japanese partner Honda's stake in the two-wheeler joint venture firm Hero Honda Motors Limited.

"The Cabinet Committee on Economic Affairs today (Tuesday) approved the proposal of Hero Investments Private Limited to receive FDI (foreign direct investment) amounting to Rs.4500 crore approximately in the investing company from Bain Capital and Lathe Investment Private Limited," according to an official statement released here.

Both Bain and Lathe are private equity firms.

Hero, in early March, said it has arranged the required finance to acquire the 26 percent holding of Honda Motor in their joint-venture company Hero Honda Motors Limited (HHML) and pegged the Japanese auto major's stake around Rs.3,842 crore.

At the Bombay Stock Exchange, the Hero Honda stock closed the day with a 3.02 percent gain at Rs.1,546.35 a share.

The two companies had ended their 26-year old association to pursue their own goals in the huge Indian two-wheeler market.

Honda already has a major presence in the Indian market through its wholly owned subsidiary Honda Motorcycle and Scooter India Private Limited.