M&M charts ₹3,000-crore plan to revive South Korean arm SsangYong

Nandana James Mumbai | Updated on February 11, 2020

Pawan Goenka, Managing Director, Mahindra & Mahindra Ltd, and VS Parthasarathy, CFO, at a press conference in Mumbai   -  PAUL NORONHA

Fund infusion likely to be through equity and bank loans

Mahindra & Mahindra Ltd is looking at a fund infusion of 450-500 billion Korean Won (₹2,700-3,000 crore) to bring its South Korean subsidiary SsangYong Motor Company back to profitability by 2022. SsangYong had posted its highest ever yearly loss in 2019.

The fund infusion is expected to be done through a combination of equity and bank loans, said Pawan Goenka, Managing Director, M&M.

SYMC posted a consolidated loss of about 320 billion Korean Won during CY2019, which includes an asset write-down of about 57 billion Korean Won. M&M has drafted a three-year plan for the recovery of the ailing SYMC, said Goenka, during a press meet here on Tuesday.

Material cost reduction

In addition to the fund infusion, M&M plans to embark on material cost reduction to save as much as 80-90 billion Korean Won per year. Efforts to reduce capex without compromising on its product development, and bringing it in synergy with M&M is another focus area. M&M is also seeing how SYMC can engage with its joint venture partner Ford.

The company is also working on developing new overseas markets, including Russia and Vietnam, over the next year or two to boost export volumes. It is also looking at reducing personal cost.

M&M recently reported a 72.76 per cent dip in consolidated net profit in the third quarter of this year. The troubles brewing at SYMC is one of the reasons for the poor performance as M&M had to undertake a one-off impairment amounting to ₹ 554 crore.

In 2019, Ssangyong sold around 1,30,000 units. Goenka said the company is not expecting a significant recovery in volume this year owing to the overall global slowdown beleaguering the auto industry.

Contrary to the company’s expectation that SYMC would breakeven in CY2019, from the second quarter onwards, it started grappling due to a host of factors, said Goenka. The overall slowdown in the auto sector, which brought down both the domestic and export volumes, is one.

Markets such as Iran, Chile, Egypt and some Western European markets had a negative impact on SYMC’s export volumes. The shift in the Korean auto market from diesel to petrol also took a toll on SYMC since it had a fairly large diesel portfolio until then, he said.

Published on February 11, 2020

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