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India’s Mahindra willing to give up management rights in Ssangyong Motor

Aug 10, 2020 (Gmt+09:00)

India’s Mahindra and Mahindra Ltd., with a 75% stake in South Korea’s Ssangyong Motor Co. Ltd., has expressed its intention to give up management rights over the carmaker, stressing that it had no plan to inject new capital into the loss-making company, according to the automobile industry sources on August 10.

Mahindra’s managing director Pawan Goenka said in a recent conference call on second-quarter results that it was working on a plan to cut its ownership in Ssangyong to less than 50% on condition that the Korean SUV maker finds a new investor.

The remarks signal a change in its earlier strategy of retaining its holding in the troubled carmaker by attracting a co-investor for a rights offering.

If Mahindra lowers its stake to below 50%, Ssangyong may have to pay back some 200 billion won ($168 million) it borrowed from foreign banks such as JPMorgan, BNP Paribas and Bank of America. The loan was lent on condition that Mahindra owns more than a 51% stake in Ssangyong.

Mahindra’s deputy managing director Anish Shah told the conference call that no additional investment would be made in Ssangyong, after a one-off cash injection of 40 billion won into the Korean carmaker in April, the sources said. At the time, the Indian conglomerate withdrew a plan to invest 230 billion won in Ssangyong, in which it acquired a 75% stake in 2010.

Falling exports in the absence of new models have dealt a heavy blow to the already troubled Korean automaker. Its operating loss has more than doubled to 117.1 billion won in the April-June quarter, compared with a shortfall of 49 billion won a year earlier.

Ssangyong has selected Rothschild and Samsung Securities as its sale managers, but no progress has been made in that effort.

By Bo-hyung Kim

Yeonhee Kim edited this article

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