Mahindra lines up $211 million plan for Ssangyong

Mahindra & Mahindra (M&M), the utility vehicle manufacturer, will help South Korea-based Ssangyong Motor Co to raise around 240 billion Korean won ($211 million).

M&M on Tuesday announced the completion of all formalities related to the acquisition of a majority stake in Ssangyong.
With this, Mahindra now holds a 70% stake in Ssangyong, for which the company has paid $463 million. M&M had emerged as a preferred bidder for Ssangyong in August 2010.

Ssangyong plans to invest around 240 billion Korean Won in brand building and product development. “Mahindra will work with Ssangyong to help the automaker raise the funds,” Pawan Goenka, president-automotive division, M&M, told Bloomberg in Seoul.

The South Korea-based carmaker was under bankruptcy protection since February 2009. Ssangyong posted a profit of 8.1 billion won last year, compared to a 346.3 billion won loss in 2009.

According to an analyst from Pinc Research, “Ssyangyong did not have any advancement in product development for a long time. The company did not release any new product since 2006. Few months back, the company had launched Korando-C in the local market. Company’s sales will definitely boost with investments in product development and brand building.”

According to company’s statement, a synergy council comprising senior management from both companies will be established to ensure focus and delivery of synergies between the two companies. The council will focus on various aspects such as global procurement, new car development and business strategy to penetrate international markets.

Mahindra has also appointed Lee Yoo Il, former court-appointed manager for Ssangyong, as the company’s president and chief executive officer. Dilip Sundaram from Mahindra will be the new chief financial officer.

Ssangyong aims to boost sales 50% to about 121,000 vehicles globally this year, Lee Yoo Il said. It sold 81,747 vehicles last year, including 49,288 overseas.

To further boost the sales of Ssangyong vehicles, M&M is planning to set up operations of Mahindra Finance in Korea.
According to the company, strategic plans such as the India project which involves launching Rexton and Korando-C brands in India have already been kicked off.

Also, under discussion are opportunities for joint product and technology development and synergy in global operations and purchase.