M&M may need lenders’ nod to cede control at SsangYong, Auto News, ET Auto

Mumbai: Mahindra & Mahindra could have to choose permission from its creditors to promote a majority stake in its Korean arm, SsangYong Motor.

International banking companies that are servicing SsangYong’s financial loans have knowledgeable that if Mahindra cedes a managing stake, it would jeopardise refinancing of the financial loans, people in the know explained. In these a state of affairs, they explained, the purchaser would have to distinct all outstanding dues in advance of taking handle.

According to SsangYong’s quarterly report, as on March 31 it experienced 390 billion received ($322.four million) of quick-term financial loans, to be repaid in considerably less than a calendar year. Out of this, 167 billion received was from foreign banking companies — JP Morgan, BNP Paribas and Financial institution of The united states.

Mahindra has a 74.6{0764260a27b4b31ca71a8adf79c3ae299a61e6f062052eee3f0df84ce9b30ade} stake in SsangYong and has initiated a stake sale system.

Banking resources explained Mahindra would locate it really tough to completely exit SsangYong, the major rationale staying the financial loans. They expect it to promote a minority stake and plough back again the income to stabilise functions at the Korean business.

Resources explained Samsung Securities and Rothschild have been introduced on board to assistance locate a suitor for SsangYong. According to reports, bankers have attained out to economical and strategic traders these as China’s Geely and BYD, who could get a foothold in the Korean current market if they acquire the SUV maker. Ford and Vietnam’s Vinfast could also be part of the fray.

Mahindra taking care of director Pawan Goenka spoke of advertising a minority stake in the cash-strapped subsidiary at the current FY20 benefits meeting. Deputy MD Anish Shah explained at the time that if Mahindra acquired a purchaser inclined to obtain its entire stake, the group would be delighted to fully exit the Korean automaker.

In response to ET’s queries, a Mahindra spokesperson explained thanks to Covid-19, its board experienced accredited several actions to tighten cash allocation, which incorporated a conclusion to not inject fresh equity into SsangYong. The Indian guardian has urged SsangYong to locate option resources of funding even though reiterating the want for a new trader, the spokesperson included.

SsangYong needs a new trader. M&M proceeds to get the job done with SYMC to seek out option resources of funding and for figuring out a likely trader in Ssangyong. As a new trader arrives on board that mechanically takes our stake down, further explained the spokesperson.

“SsangYong appeared a good obtain for Mahindra, but now it’s obvious the strategy to stem down losses didn’t get the job done and the business experienced to create down investments,” SBICap Securities retail research head Mahantesh Sabarad explained.

Just one of the biggest challenges for SsangYong has been its incapacity to construct scale and get back shed foothold in China and Russia which used to be essential volume contributors. The business marketed more than 1.35 lakh units in 2019, with exports accounting for just 27,446 units. At property, it marketed in excess of 1 lakh units for the fourth consecutive calendar year in spite of intensive opposition. Having said that, it has not been equipped to scale up overall volume outside of 1.6 lakh units.

It has taken Mahindra pretty much 8 several years to utilise SsangYong’s architecture to come out with its possess product. Based on the Tivoli, Mahindra launched the XUV300 in 2019 and it intends to share the B and C architecture which Mahindra is acquiring with Ford.

With JVs these as Renault, Ford (in its previously stint) and Navistar getting not labored that perfectly for Mahindra, industry experts sense SsangYong appears to be also heading on the identical path.

Also Read through: Auto demand has bounced back again to 35{0764260a27b4b31ca71a8adf79c3ae299a61e6f062052eee3f0df84ce9b30ade} of pre-covid concentrations: Pawan Goenka