Exclusive: MG Motor India in talks with JSW Group for 15-20% stake sale at $2 billion valuation

MG Motor India, the British brand owned by China’s largest car maker Shanghai Automotive, is in advanced talks with homegrown $22 billion conglomerate JSW Group for a stake sale.

With its foreign direct investment proposal with the government of India stuck, MG India has been relying on external commercial borrowings from the parent company to keep its operation afloat. The carmaker, which has its plant in Halol, Gujarat, has been on the fund-raising route for close to a year now and has explored over a dozen potential investors who could acquire a stake in the company.

Autocar Professional learns that M G Motor is seeking a valuation of a minimum $2 billion to $2.5 billion (Rs 16,494 crore to Rs 20,617 crore) and is in talks with JSW for a 15-20% stake dilution. This may lead to a fund infusion of over Rs 2,000 to Rs 3,000 crore in the company, which currently retails five SUVs – Astor, Gloster, Hector 5-seater, Hector Plus and ZS EV – and is set to unveil the two-door compact EV, MG Comet, on April 26.

“Amongst various investors and companies engaged by M G Motor so far, the talks with JSW are progressing well and if both the companies agree on the valuation, the deal may be signed in weeks if not months. If all goes well, the deal is likely to be consummated in 4-8 weeks,” said one of four people aware of the plan.

The negotiations, if fructified, would offer M G Motor a much-needed finance line, beyond loans, to meet its future expansion plans. For JSW, this will mark its entry into the automotive segment, something which has been on the drawing board since 2018. JSW in fact was almost on the final leg of acquiring GM India’s Talegaon plant in 2019 but dropped the plan to do so amid economic headwinds.

On a specific query from Autocar Professional on the likely deal with JSW, Rajeev Chaba, president and MD of M G Motor India, expressed ignorance to and said he doesn’t know about it. He, however, hinted at tht saying, “We are taking one step at a time. Then we will look at what next . . .  we are working with various agencies and institutions and very soon, we should be able to announce something.”

JSW's CFO recently told PTI that the company intends to manufacture four-wheelers, but gave no further details on the manufacturing location or investments.

The company’s deputy MD told Autocar Professional last week that "It (the plan to enter car business) is being worked out," said Jayant Acharya, deputy MD and board member at JSW.

MG Motor India’s growing need for a second plant
MG Motor entered India in September 2017 by acquiring General Motors India’s Halol plant. It has been manufacturing vehicles over the past four to five years but since the factory is over a decade-and-a-half old, there is a limitation to the extent to which the brand can produce. Hence, it has been actively exploring a second plant in India for over a couple of years now.

The SUV specialist has already invested close to Rs 5,000 crore in India and was ready to infuse a similar amount, but the FDI proposal has been stuck with the government of India since 2020, after a number of skirmishes at the India-China border.

MG Motor India, which recorded sales of 48,866 units, up 21% YoY, in FY2023, is eying speedy growth this year. It has targeted sales of 80,000 to 100,000 units, provided its supply chain scenario improves. Chaba hopes to break into profits in FY2024 and utilise the complete plant manufacturing capacity by 2024. Hence, the company is currently in need to define its new blueprint, which will take at least a couple of years in setting up a new factory as well as prepare the products to complement the existing range of Astor, Hector, Gloster and now the Comet EV.

In India’s highly competitive passenger vehicle and utility market, MG Motor India has been successful in establishing a strong mindshare with buyers even though its market share has remained sub-2%. Its portfolio of SUVs and EVs have been a key differentiator in the marketplace. Its bullishness on electric mobility is reflected in the investment of almost $100 million (Rs 825 crore) to launch the new compact EV Comet and penetrate deeper into the fast growing zero emission vehicle market in the country.

India has been a key base for SAIC in its internationalisation push, and China's largest car maker is keen to use India as a key hub for exports in the future.

Autocar Professional contacted both companies for their comments. While a JSW spokesperson offered “No comments” to the official query, an MG Motor India spokesperson said, “As per company policy, at MG Motor we do not comment on speculation,” to the specific query regarding the deal with JSW.

MG Motor India’s decision to sell stake happens amid struggles to obtain FDI clearance from the government of India for its future investment. It is precisely the same reason why Great Wall Motors, Changan and Foton, which despite spending years in India, decided to exit the market amid geo-political tension.

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