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Mahindra's Ssangyong defaults on loan repayment worth $55 million

Mahindra's Ssangyong defaults on loan repayment worth $55 million

Dec 15, 2020
05:57 pm

What's the story

Mahindra has announced that its South Korean unit, Ssangyong Motor Co., has failed to repay a loan worth 60 billion won (approximately $55 million). The company revealed that out of the total payment due on December 14, roughly 30 billion won was owed to Bank of America, 20 billion won to JP Morgan Chase, and the rest to BNP Paribas. Here are more details.

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The company's stocks plummeted soon after the announcement

Both Mahindra and Ssangyong witnessed a downward spiral on the stock market. Shares of the Indian automaker fell as much as 1.5% to their lowest since November 23, while those of Ssangyong plummeted up to 7.72%.

Mounting woes

Ssangyong: Mahindra's growing liability

Ssangyong was bought from near-insolvency in 2010. However, Mahindra has struggled to transform it into a profitable venture. Instead, Ssangyong has only emerged as a liability in the past decade. Since June this year, Mahindra has been looking for a buyer who will be ready to purchase all or most of its 75% stake in the South Korean sport utility vehicle (SUV) manufacturer.

Exit strategy

Mahindra's new business plan

Mahindra is following a restructuring plan as part of which, it is reviewing all loss-making businesses to minimize costs and prioritize capital expenditure. Ssangyong has total outstanding loans of about 100 billion won (nearly $92 million). Though Mahindra has made a commitment to cover them, its final liability will be limited to the amount not recovered from the South Korean auto giant.

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Mahindra will launch several cars in India in 2021

Ssangyong's dismal performance may have put a damper on Mahindra's ambitions overseas, but back home, it is scheduled to launch seven models next year. They include the next-generation XUV500, TUV300, Scorpio Sting, TUV300 Plus, XUV300 Sportz, XUV300 Electric, and eKUV100.