Automotive major Mahindra & Mahindra (M&M) said it would aim to bring Ssangyong Motors of Korea, (for which it has been selected as the preferred bidder), into its fold “near debt free”.
“We want Ssangyong to come into M&M fold with a clean slate,” Rajesh Jejurikar, chief of operations of automotive sector of M&M said. There are also plans to infuse significant cash into the bankrupt Korean company, on which Jejurikar did not elaborate. It is learnt that M&M would infuse nearly $400 million as equity into Ssangyong to acquire a controlling stake. These funds would be used to repay all long-term debts at around $320 million as of March 2010 post restructuring.
“As per our estimates, we hope to bring the Korean company into our fold by December this year or latest January 2011. The company has a positive EBIDTA (or operating profit) of nearly 2 per cent,” he said.
While Ssangyong has a chequered history, recent performances suggest a turnaround in fortunes. For the first seven months of 2010 the company’s sales are 25 per cent higher than the full of 2009. The labour force too has been restructured reducing fixed costs by nearly 37 per cent. Ssangyong posted a positive EBIDTA in the first quarter of the current fiscal after a gap of seven quarters.
On the domestic front, M&M is stung by shortage of tyres, castings and fuel injection pumps. “We are losing nearly 1,500 to 2,000 vehicles every month in sales due to supply-side constraints. We are trying to address these component issues. It might take a while before we get back into full steam of delivering market requirements,” Jejurikar said.