Mahindra pays KRW 80 billion to Ssangyong Motor on account of new shares

Friday 24 May 2013, 09:59 AM by

Ssangyong Motor, the completely owned division of Mahindra Group, has officially declared that it has received the payment of 80 billion won from its parent company Mahindra & Mahindra Group on account of new shares. As the South Korean auto maker has received the cash, its paid-in capital has been substantially increased. In order to secure investment funds for the development of new products, Ssangyong Motor decided to issue a third party allotment to its parent company on February 14, 2013.

The of late increase in paid-in capital has been a result of the issuance of some 14.545 million new shares, which has increased the company's capital ratio of 11.9 per cent. Reportedly, all the new shares will be locked for one year and the anticipated listing date is planned for June 7, 2013. Post this, the shareholding ratio of Mahindra Group in Ssangyong Motor raised to 72.85 per cent from 69.63 per cent. Since the process of increase in paid-in capital has been smoothly completed, the product development strategy of South Korean auto maker is likely to move at faster pace. Along with this, the debt ratio of the auto maker will reduce, whereas the cash liquidity will improve. Industry experts are of a view that both of these aspects will strengthen the Ssangyong's financial condition.

The Chief Executive Officer of Ssangyong Motor, Lee Yoo-il, was quoted as saying, “The 80 billion won paid-in capital for stock has been received, and the paid-in capital increase has been successfully completed. As we have secured the funds, we will vigorously proceed with our investments for new product development such as small engines and small CUV and make utmost efforts for an early turnaround of the company and improve the corporate value.”

The increase in paid-in capital has emerged as a proof, which represents the strong commitment of Mahindra and its confidence in the development of Ssangyong Motor. Besides increase in the 80 billion won paid-in capital, Mahindra Group has also expressed its concern to roll over the corporate bond of 95.4 billion won, which is scheduled to expire in 2014, by the end of another year. Interestingly, it will be another source of funds for the South Korean auto maker.

In 2011, Mahindra Group invested 522.5 billion won in order to acquire 70 per cent share in the Ssangyong Motor Company. Since the took-over, the Board of Directors of Ssangyong Motor have approved an investment around 500 billion won till now, including 295.8 billion won investment, which accounts for development of small-sized new engine and CUV research projects.

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