JSW's Sajjan Jindal to Bolster MG Motor India's Prospects in Joint Venture
JSW Group Chairman, Sajjan Jindal, and China's SAIC Motor
Corp have reportedly reached an agreement to invest in MG Motor India, as per a
report in The Economic Times. The announcement of this deal is anticipated
either by the end of this month or coinciding with the Diwali festival.
Per the terms of the agreement, a privately owned company
associated with Jindal will initially acquire a 32-35 percent stake in MG Motor
India, while SAIC is set to hold a majority 51 percent ownership. An Indian
financial institution will also hold an 8 percent stake in MG Motor India. The
remaining ownership will be retained by MG India and its local employees.
It's worth noting that no companies within the JSW Group are
participating in this transaction. Jindal is making this investment through his
private company and will have the option to increase his stake to 49 percent
initially, with the possibility of further raising it to 51 percent post the
initial public offering (IPO). Consequently, the Chinese ownership will
decrease to less than 40 percent.
The report also indicates that the losses incurred by the
company will be absorbed by the equity capital of SAIC. Once these losses are
offset, MG Motor India plans to initiate its IPO as an offer for sale (OFS),
where SAIC will sell its stake.
This strategic partnership is geared towards introducing
electric cars to the Indian market by January 2024. MG Motor India, however,
has declined to provide any comments on this development, stating, "As
stated previously, we are evaluating all options to grow our presence in the
country and create a win-win situation for all stakeholders while keeping
customers’ interests at the core. This would encompass bringing world-class
technology, enhancing localization, and retaining pole position in customer
satisfaction for both sales and aftersales. We decline to comment on the query
as it is speculative."
The automaker has faced financial constraints and requires
funds to sustain its operations. Since its entry into the Indian market in
2018, it has accumulated significant losses, totaling around Rs 1,720 crore.
Consequently, the company's valuation may fall considerably short of the
initially sought-after $8-10 billion, potentially amounting to approximately $1
billion or between Rs 7,000-8,000 crore.
For the fiscal year ending in 2023, MG Motor India held a
1.26 percent share in India's passenger vehicle segment.