Homegrown automaker Mahindra and Mahindra on Thursday confirmed that it plans to take a position around $400 million in its South Korean unit SsangYong Motor. It clarified that the business plans is aimed toward leading profitability of the corporate within the next three years.
“The board of SsangYong has approved a three-year business plan, which results in the profitability of the corporate within the year 2022. This plan requires outside funding of 450-500 billion KRW ($380-425 million) over a period of three years. About half this amount is to repay the prevailing loan and therefore the remaining is to reinforce the capex required for brand spanking new development ,” said Mahindra.
It also shared details about how the Korean company will source funds for its turnaround. Mahindra said that no equity proposal has been put up to the Mahindra board of directors thus far .
“Funds required are expected to be generated by a mixture of fresh bank loans, new investment and further equity investment by Mahindra. No equity proposal has been put up to the Mahindra board of directors as on date. A proposal are going to be presented to the board and a choice are going to be made only after Mahindra management has vetted the plan and evaluated its feasibility,” it said.
Earlier media reports quoting Pawan Goenka, MD, Mahindra and Mahindra said SsangYong was expected to interrupt even in 2019 but things started reversing last year thanks to a slowing global economy and a shift in its domestic market to petrol-fuelled cars from diesel. It added that Mahindra has involved a three-year turnaround plan, which has been approved by SsangYong’s board. SsangYong, a serious utility vehicle (UV) player, was acquired by Mahindra in 2010.
Initially, Mahindra started selling SsangYong UVs in India but later stopped selling the models and had earlier stated that it's no plans to try to to so. Mahindra, however, uses platform and technology of its Korean unit to form SUVs and sell them as Mahindra products.