Mahindra to invest in SsangYong’s plan to increase capital by Rs 400 crore

February 14, 2013: Following a Board of Directors’ meeting today, the Mahindra Group-owned Ssangyong Motor has announced its approval for a paid-in capital increase of KRW 80 billion (Rs 397.886 crore) to raise investment funds.

The company will issue 14,545,455 new shares through third-party allotment, increasing the company’s paid-in capital by 11.9 percent (current shares stand at 122,674,641). The issue price will be KRW 5,500 (Rs 273.54) per share with payment expected on May 22, 2013 and listing expected on June 7, 2013.

The Board resolution will result in a capital increase from the current KRW 613.4 billion to 686.1 billion. With the debt-to-equity ratio going down and liquidity increasing, the company’s financial strength is expected to improve significantly. SsangYong will use the funds from this capital increase to invest in new product developments such as small CUV (Crossover Utility Vehicle) models.

Dr Pawan Goenka, chairman of the SsangYong Motor board, said, “This paid-in capital increase reflects Mahindra’s strong commitment to support SsangYong Motor in its efforts to achieve an early turnaround. By expanding investment in SsangYong and creating tangible synergy in various areas such as sales, product development and sourcing, we will continue to increase our global competitiveness.”

Lee Yoo-il, CEO of SsangYong Motor, commented, “With the recent decision on paid-in capital increase, we will be able to secure the necessary investment funds and at the same time, strengthen the financial soundness of the company”. He added, “Furthermore, as we carry out the investments in new models including a small CUV, our product development will also gain momentum.”

Mahindra invested Rs 2,100 crore in March 2011 to acquire 70 percent of the equity in Ssangyong Motor Company, and it approved an investment plan worth KRW 295.8 billion (Rs 1,467 crore) at the first Board Meeting held in February 2012; a plan, which includes the development of new engines and a small CUV project.