Mahindra & Mahindra (M&M) has expressed its inability to inject any fresh equity into SsangYong Motor Company (SYMC) in response to the South Korean automaker’s demand for the same from the former to the tune of 500 billion KRW ($406 million) over the next three years. Instead, the company board has authorised the M&M management to consider a special one-time infusion of up to 40 billion KRW ($32 million) over the next three months.
In a stock exchange notice, M&M said its board of directors held a special meeting to review investment in SYMC and to discuss the approach to capital allocation in the light of the Covid-19 impact. “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,” said the filing.
The board noted that large parts of the global economy are under shutdown. India particularly is under an unprecedented 21-day complete lockdown. Only emergency services are operating, while everything else is closed, M&M said. “The board has also initiated several measures to tighten capital allocation norms and ensure that M&M remains strong through the current crisis and beyond,” it said.
However, in order to ensure SYMC’s continuity of business operations, while they are exploring alternate sources of funding, the board has authorised the M&M management to consider a special one-time infusion of up to 40 billion KRW ($32 million) over the next three months. The company said it would “make every effort to continue to support all other non-fund initiatives that are currently in place to help SYMC reduce capex, save costs and secure funds”.
“The board hoped that the employees and management at SYMC understand the magnitude of the unfortunate and unforeseen crisis created by the Covid-19 virus, which has compelled it to take the difficult decision,” the company said.
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