Mahindra & Mahindra Ltd. is in discussions with an investor for selling a majority stake in Ssangyong Motor Co. as India’s largest SUV maker reassesses its investments amid the pandemic.
Mahindra will hold 30% or less in Ssangyong if the deal goes through and will also do a 25% capital reduction, Pawan Goenka, managing director of the Indian automaker said at a briefing Friday. It expects to sign the term sheet next week and will conclude the transaction by Feb. 28, he said. The company had purchased 70% stake in Ssangyong for $368 million in 2010.
“Things have changed drastically in the last 12-15 months,” Goenka said. With the kind of change that’s happening in business scenario and auto industry, we’ve to again re-prioritize where we put our money and where we put emphasis.”
A widespread fall in consumer demand across India has hit automotive companies particularly hard as the economy reels under a recession. Mahindra has been the worst hit as the company reported its first quarterly loss in nearly two decades last year.
Mahindra also pulled out of a proposed joint venture with Ford Motor Co. in India as the capital requirements didn’t make sense at a time when the pandemic has decimated consumer demand.
“World turned upside down with the Covid pandemic,” Goenka said. “Having worked on this JV for over 2 years it wasn’t an easy decision but both companies were clear that given the current situation this is the most prudent decision to make and move on.”
Mahindra and Ford will continue to look at opportunities to partner, Goenka said, adding that Mahindra may cancel or add projects with Ford after reviewing them.
The automaker will focus on building a strong SUV portfolio based on electric vehicles and won’t try to build an international presence in short term, according to the company’s Executive Director Rajesh Jejurikar.
Bloomberg