Mahindra & Mahindra has reportedly received clearance from the Reserve Bank of India (RBI) to reduce its ownership in SsangYong Motor. The Indian auto giant has a 74.65 per cent stake in the Korean car company but has been looking to divest its stake in the firm since last year. Mahindra is currently in talks with HAAH Automotive Holdings, which has been a leading potential investor for acquiring SsangYong. carandbike has reached out to Mahindra for an official statement on the matter and will update this story as and when we receive a response.
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Mahindra has got approval from RBI to reduce its stake in SsangYong from 75 per cent to 25 per cent through capital reduction, according to the report. The report quotes Seung Bum, Partner at Seoul-based corporate law firm Yulchon, who says, "RBI has approved capital decrease. Ssangyong is trying its best to negotiate with HAAH and submit the P-plan to the court, before March 15. Of course, there is still a risk that negotiation with HAAH would not be very successful."
The capital reduction is necessary for the cash-strapped SsangYong before HAAH invests in the automaker. The delay in investment though is expected to tip the company towards the bankruptcy process. HAAH, a US-based vehicle distributor, had sought to infuse $250 million in the Korean firm. However, the investor had laid down the condition that a similar amount would be invested by the state-run Korean Development Bank (KDB) as well. However, KDB has refused to infuse a fresh investment in SsangYong without a revival roadmap in place.
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The P-plan is a pre-packaged rehabilitation plan prepared by SsangYong with its creditors aimed to accelerate the financial reorganisation of the company. Back in December 2020, SsangYong Motor filed for receivership in Korea and saw the company ask for autonomous restructuring support (ARS) programme for rehabilitation. Under the P-plan, SsangYong's creditors including KDB will have to agree to the plan, along with the new investor on the investments and roadmap for revival.
The report further states that HAAH Automotive believes SsangYong will continue to incur losses of around 600 billion won over the next two years, till it starts selling cars in the US. Meanwhile, KDB has demanded SsangYong's labour union to extend the validity period of the collective agreement and ban strikes as a prerequisite for financial support.
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Last year, the Mahindra board had concluded that it won't further invest in SsangYong rejecting a fresh investment of $400 million. The company had originally purchased the ailing Korean automaker for Rs. 2100 crore in 2011. The automaker saw a revival with new products and platforms over the past decade that included the successful Tivoli and Rexton SUVs. However, the company has been facing a sales decline consistently over the past few years, and now fewer operational days at the Pyeongtaek plant.
Source: ETAuto.com
