Mahindra & Mahindra, the majority shareholder of Ssangyong Motor, on Thursday approved a plan for investing 80 billion won ($75 million) into the nation’s smallest carmaker.
This will mean, for this year at least, Ssangyong will have some 170 billion won worth of capital to work on the development of new models and facility investment.
“We see a bright future in Ssangyong,” Pawan Goenka, president of Mahindra’s automotive and farm equipment sectors, told The Korea Herald. “We have no exit strategy for the company,” he added, stressing that Mahindra was in for the long term.
The approved announcement was to help Ssangyong to meet its future requirements, such as for developing new products and facility investment, Goenka said.
The 80 billion won would be supplied by Ssangyong issuing around 14.5 million new shares through third-party allotment, with Mahindra being the third party. The issuing price will be 5,500 won per share, with listing slated for June 7.
However, Mahindra was quite firm that the fresh capital be used only for future expenses, and not to cover previous mishaps, including litigations involving lawsuits filed by outside labor unions, which are calling for a parliamentary audit to investigate why Ssangyong was forced to lay off so many employees in the past.
Goenka also said 80 billion won was as much as the Indian company could commit to for this year, despite claims from Ssangyong that it needed at least 200 billion won to 300 billion won to produce a single new car.
“But we have plans of our own,” said Lee Yoo-il, president of Ssangyong. “We’ll be selling more cars and we can take out loans because we currently have no loans outstanding.”
Another 95 billion won was earlier injected into Ssangyong via corporate bond issuance.
Originally, Mahindra had said it would be investing some 1 trillion won over the next four years into the automaker.
Ssangyong said the plans are still valid, stressing that the investment could be in the form of indirect support, such as guarantees to help the company secure loans.
Mahindra acquired a majority stake in Ssangyong in 2010 as the carmaker struggled to get back on its feet. The company extricated itself from court receivership in 2011 after the court found it capable of pursuing a revival.
By Kim Ji-hyun (email@example.com