M&M may need lenders’ nod to cede control at SsangYong

Mumbai: Mahindra & Mahindra may have to take permission from its lenders to sell a majority stake in its Korean arm, SsangYong Motor. Foreign banks that are servicing SsangYong’s loans have informed that if Mahindra cedes a controlling stake, it would jeopardise refinancing of the loans, people in the know said. In such a scenario, they said, the buyer would have to clear all outstanding dues before taking control. According to SsangYong’s quarterly report, as on March 31 it had 390 billion won ($322.4 million) of short-term loans, to be repaid in less than a year. Out of this, 167 billion won was from foreign banks — JP Morgan, BNP Paribas and Bank of America. Mahindra has a 74.6% stake in SsangYong and has initiated a stake sale process.Banking sources said Mahindra would find it extremely difficult to fully exit Ssang-Yong, the primary reason being the loans. They expect it to sell a minority stake and plough back the money to stabilise operations at the Korean company. 76655137Sources said Samsung Securities and Rothschild have been brought on board to help find a suitor for SsangYong. According to reports, bankers have reached out to financial and strategic investors such as China's Geely and BYD, who could get a foothold in the Korean market if they acquire the SUV maker. Ford and Vietnam’s Vinfast could also join the fray. Mahindra managing director Pawan Goenka spoke of selling a minority stake in the cash-strapped subsidiary at the recent FY20 results conference. Deputy MD Anish Shah said at the time that if Mahindra got a buyer willing to buy its entire stake, the group would be happy to totally exit the Korean automaker. In response to ET’s queries, a Mahindra spokesperson said due to Covid-19, its board had approved several measures to tighten capital allocation, which included a decision to not inject fresh equity into SsangYong. The Indian parent has urged SsangYong to find alternative sources of funding while reiterating the need for a new investor, the spokesperson added. “SsangYong appeared a good buy for Mahindra, but now it’s evident the strategy to stem down losses didn’t work and the company had to write down investments,” SBICap Securities retail research head Mahantesh Sabarad said.

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