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Mahindra says W500b required for SsangYong turnaround by 2022: sources

Mahindra & Mahindra Managing Director Pawan Goenka (Yonhap)
Mahindra & Mahindra Managing Director Pawan Goenka (Yonhap)

Indian carmaker Mahindra & Mahindra Ltd. is considering a capital injection of 500 billion won ($430 million) for its South Korean unit, SsangYong Motor Co., by 2022 to secure its turnaround, industry sources said Tuesday.

In a meeting with SsangYong Motor employees on Thursday, Mahindra & Mahindra Managing Director Pawan Goenka said 500 billion won is needed to turn SsangYong Motor around in the next three years, a person familiar with the matter told Yonhap News Agency.

Goenka flew into Seoul on Thursday to discuss how to put the loss-making unit back on track with Lee Dong-gull, chairman of the state-run Korea Development Bank, the main creditor bank of SsangYong Motor.

He left for India on Friday and will participate in SsangYong's Jan. 30 board meeting via video conferencing.

Goenka said the Indian carmaker will make a 230 billion-won investment in SsangYong Motor after obtaining approval from its board during his meetings with SsangYong's union and the KDB chairman, according to the sources.

But Mahindra has said that the cash injection could be made if the KDB extends a fresh loan to SsangYong Motor, indicating that it expects a loan of over 200 billion won from the Korean policy lender to help SsangYong Motor keep up its operations.

But the KDB did not mention whether Mahindra asked for a fresh loan for its cash-strapped South Korean unit to help it keep up its operations. It extended a loan of 100 billion won to the loss-making SsangYong Motor last year.

SsangYong Motor has struggled with deteriorating earnings results since 2017, when it shifted to a net loss of 66 billion won from a net profit of 58 billion won the previous year. In 2018, its net losses continued, reaching 62 billion won.

In 2019, SsangYong Motor's annual sales fell 6.5 percent to 132,799 vehicles from 141,995 units a year earlier due to lower demand. Earnings results for 2019 will be released in the coming weeks.

SsangYong Motor's lineup is composed of the flagship G4 Rexton, as well as the Tivoli, Korando and Rexton Sports.

In bankruptcy proceedings in March 2011, Mahindra acquired a 70 percent stake in the carmaker for 523 billion won as part of its globalization strategy.

Mahindra currently owns a 74.65 percent stake in SsangYong Motor after two rounds of rights issues worth 130 billion won since 2013. (Yonhap)



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