M&M to drive global ambitions with SsangYong

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Our Bureau

Mumbai, Aug. 12

Mahindra & Mahindra, which has emerged the preferred bidder for SsangYong Motor Company, believes the acquisition is critical to its global ambitions.

“What this has done for us is provide an opportunity to achieve our ambition, which is to become a global player in the utility-vehicle segment. SsangYong has a great heritage and, like us, is a specialist in UVs,” said Mr Anand Mahindra, Vice-Chairman and Managing Director, at a press meet here on Thursday.

M&M will now enter into an MoU with SsangYong, which will be followed by a due diligence process. The whole transaction will be wrapped up by November.

While there were no details on the bid amount. Mr Bharat Doshi, Chief Financial Officer, said SsangYong would be acquired as a debt-free company. “The money going in will be used to repay its long-term debt,” he said. As on December 31, 2009, SsangYong had debt of $640 million.

“We have Rs 2,500-crore surplus cash. Our debt equity position is 0.3:1. There is sufficient ability to raise funds,” Mr Doshi said. M&M would look at such options as diluting stake in companies where it has high investments.

Dr Pawan Goenka, President, Automotive and Farm Equipment Sector, said the plan was to bring SsangYong products to India, particularly the compact SUV Korando, and Rexton. The goal is to start local assembly at the Chakan plant where M&M's world SUV, codenamed W 201, is being developed.

Strategic fit

Reiterating that SsangYong was a strategic fit with M&M, Dr Goenka said the company has a strong R&D backup. “One challenge is that the product pipeline has weakened due to lack of resources. We have to strengthen the portfolio and increase its brand equity,” he added.

Mr Mahindra said: “We intend to keep it independent. This company has the internal capability to make engines. This gives us an advantage.” SsangYong has two plants with a capacity to make 120,000 vehicles a year. “Sales this year have been good with 44,000 units so far, over 50 per cent from overseas markets,” Dr Goenka said.

Related Stories:
M&M in pole position for SsangYong as Renault-Samsung pulls out
M&M board gives green signal for SsangYong bid
M&M will start due diligence soon for SsangYong

(This article was published in the Business Line print edition dated August 13, 2010)
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