Mahindra & Mahindra Ltd has rolled back plans to infuse fresh funding into SsangYong Motor Company (SYMC). In February, M&M had announced 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.

M&M Board of Directors held a special meeting on Friday to review investment in SYMC and at the same time to discuss the approach to capital allocation in light of the COVID 19 impact. “After lengthy deliberation given the current and projected cash flows, the M&M Board took a decision that M&M will not be able to inject any fresh equity into SYMC and has urged SYMC to find alternate sources of funding,”M&M said in a press statement.

The request for fresh funding had come from the management and labour union of SsangYong Motor Company for fresh injection of equity from M&M to help the company fund 500 billion KRW ($406 million) of requirements over the next three years.

“The Board noted that large parts of the global economy are under shutdown. India particularly is under an unprecedented 21-day complete lockdown. Only emergency services are operating while, everything else is closed. The Board has also initiated several measures to tighten capital allocation norms and ensure that M&M remains strong through the current crisis and beyond,”M&M said

However, with a view to enable SYMC to have continuity of business operations, whilst they are exploring alternate sources of funding, the board has authorised the M&M management to consider a special one-time infusion of upto 40 billion KRW ($ 32 million) over the next three months.

Moreover, M&M would make every effort to continue to support to all other non-fund initiatives that are currently in place to help SYMC reduce Capex, save costs and secure funds. This includes capex-free access to Mahindra’s new platforms such as W601, support technology programs which would help reduce SYMC’s capex, support the material cost reduction program that is currently underway, support SYMC management to find new investors.

“The Board hoped that the employees and management at SYMC understand the magnitude of the unfortunate and unforeseen crisis created by the COVID-19 virus, which has compelled it to take the difficult decision,”M&M said

SYMC had posted a consolidated loss of about 320 billion Korean Won during CY2019, which includes an asset write-down of about 57 billion Korean Won. 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. 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

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