SsangYong Motor (SYMC) has begun scouting for a buyer of Mahindra & Mahindra’s (M&M) majority stake in the struggling South Korean automobile company. This comes after Mahindra & Mahindra rolled back plans to infuse fresh funding into SsangYong.
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 back to profitability by 2022. SsangYong had posted its highest ever yearly loss in 2019. The lockdown worsened the situation for the South Korean company.
The slowdown in automobile sales also impacted M&M’s ability to support its foreign partner.
Impacted by a one-time write-down of ₹3,577.64 crore, M&M posted a consolidated net loss of ₹3,255.02 crore in the fourth quarter ended March 31, 2020, against a net profit of ₹969.25 crore during the same period a year ago.
In April, M&M Board of Directors held a special meeting on 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 has said in a press statement then.
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 of M&M. 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