Mahindra & Mahindra (M&M) on Friday (3 April 2020) said its board held a special meeting to review investment in SsangYong Motor Company (SYMC) and to discuss the approach to capital allocation amid COVID 19 impact.
The request from the management and labour union of SYMC for fresh injection of equity from M&M to help the company fund 500 billion KRW (South Korean won), or ($406 million) of requirements over the next three years, was considered by the board.
The board noted that large parts of the global economy are under shutdown. India particularly is under an unprecedented 21-day complete lockdown. The board has initiated several measures to tighten capital allocation norms and ensure that M&M remains strong through the current crisis and beyond.
After lengthy deliberation given the current and projected cash flows, the M&M board took a decision that M&M will not be able to inject any fresh equity into SYMC and has urged SYMC to find alternate sources of funding.
However, with a view to enable SYMC to have continuity of business operations, whilst they are exploring alternate sources of funding, the board has authorised the M&M management to consider a special one-time infusion of upto 40 billion KRW ($32 million) over the next three months.
Moreover, M&M would make every effort to continue to support to all other non-fund initiatives that are currently in place to help SYMC reduce capex, save costs and secure funds. SYMC will get capex-free access to M&M's new platforms such as W601. M&M will support technology programs which would help reduce SYMC's capex. M&M will also support the material cost reduction program that is currently underway. Further, M&M will also support SYMC management to find new investors.
On a consolidated basis, M&M's net profit slumped 84.74% to 199.94 crore on a 4.45% decrease in net sales to Rs 25,019.86 crore in Q3 December 2019 over Q3 December 2018.
M&M's segments include automotive, farm equipment, financial services, real estate, hospitality and others. Automotive segment comprises of sale of automobiles, spares, mobility solutions and construction equipment. Its farm equipment segment comprises of sale of tractors, implements and spares.
Shares of M&M advanced 3.03% to close at Rs 280.90 on Friday, 3 April 2020.
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