Mahindra has decided to give up its portion of controlling stake in the South Korean car brand, SsangYong. However, the existing loans of SsangYong might be a major obstacle for Mahindra in the exercise.
Mahindra and Mahindra currently hold the ownership rights of 75 per cent share in SsangYong. As per a current report, Mahindra is looking to sell its stake in the South Korean car brand. It is suggested that Mahindra and Mahindra might have to ask for permission from lenders to sell its share. According to the banks that are handling SsangYong’s loans, the debt would make it difficult for Mahindra to seek buyers since the buyers would have to pay off the loan before the handover.
Mahindra is the biggest shareholder of the South Korean car firm SsangYong
Mahindra acquired SsangYong Motor Company in 2011 at the price of USD 463 million. After the acquirement, things had started to look brighter for the South Korean carmaker. In 2015, the company launched the new-gen Tivoli which gained considerable success. Other than that, SsangYong also took part in the development of the XUV300 which shares engine and platform with the Tivoli X100.
Despite the Mahindra’s attempt to manage expense and cash flow, SsangYong failed to expand its reach in the market over the past few years. Last year, the South Korean car manufacturer sold 1.35 lakh units in China, which is lower than what it used to. Within the South Korean market, the SsangYong’s yearly sales retained at around 1 lakh units for 4 years in a row.
Due to the SsangYong’s worrying situation, Mahindra decided to drop their controlling share in the company
As per the report, in the first quarter of this year, Mahindra suffered a loss of Rs. 2,510 crore due to the COVID-19 pandemic. 80 per cent of the loss is related to SsangYong and GenZe. SsangYong is reported to have a short-term loan of 390 billion won (approx. 2,554 crores). This amount of loan needs to be cleared in less than 12 months.
Seeing SsangYong’s underwhelming performance, Mahindra has decided to drop a portion of their controlling stakes in the South Korean car company. However, as the report suggests, it will not be easy for Mahindra to sell their controlling stake due to the loan difficulties. Samsung Securities and Rothschild have joined to look for buyers. By far, Geely, a Chinese auto firm which owns Volvo and BYD has approached Mahindra while it is reported that Vinfast and Ford are also running in the race.