Mahindra and Mahindra has held a Special Board Meeting to review its latest investment in SsangYong Motor Company, owing to the economic disruption caused by the COVID-19 pandemic.
The global automotive industry has pretty much come to a grinding halt, owing to the COVID-19 pandemic. This situation has not just brought physical production activities and, consequently, revenue generation to a standstill but has also affected industry decisions. Mahindra and Mahindra, for instance, has held a special board meeting to review its investment decision in SsangYong Motor Company (SYMC). The meeting also discussed the approach to capital allocation due to the impact of the COVID-19 slowdown.
The investment decision was initially arrived at because of the request from SsangYong Motor Company for a fresh injection of equity from M&M to help the company fund a requirement of 500 billion KRW (USD 406M) over the next three years.
However, considering that the Indian economy is currently under lockdown, and keeping current and projected cash flows in mind, the M&M board has announced that the company will not be able to invest any fresh equity into SsangYong Motor Company at this stage, and the company has urged the South Korean carmaker to find alternate sources of funding.
But the board has taken into consideration all factors and has acknowledged that in order to enable SsangYong Motor Company to have continuity of business, the management at Mahindra and Mahindra has been authorised to consider a special one-time infusion of up to USD 32M over the next three months. The decision is a strategic one, as M&M does hold 70 per cent stake in SsangYong Motor Company.
Mahindra and Mahindra have announced that it will make every effort to continue to support all other non-fund initiatives that are currently in place to help SsangYong Motor Company reduce Capex, save costs, and secure funds.
Some of the initiatives from M&M that will help facilitate this are as follows:
- Capex-free access to Mahindra’s new platforms such as W601
- Support technology programs that would help reduce SYMC’s Capex
- Support the material cost reduction program that is currently underway
- Support SYMC management to find new investors