Mahindra scraps SsangYong investment plan due to COVID-19 crisis

The logo of Mahindra and Mahindra is seen on a car at a showroom in Mumbai, India, August 30, 2016. REUTERS/Danish Siddiqui/Files

BENGALURU (Reuters) - India's Mahindra and Mahindra Ltd MAHM.NS will not invest further in its struggling South Korean unit SsangYong Motor Co 003620.KS, the company said on Friday, as automakers try to save cash in an effort to ride out the coronavirus crisis.

Mahindra also said it has asked majority-owned SsangYong Motor to look for other means of funding as coronavirus-driven restrictions in India exacerbated a slowdown in demand, with Mahindra posting an 88% plunge in March sales.

“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,” Mahindra said in a regulatory filing.

But the company, which makes popular sport-utility vehicles such as Scorpio, said it would consider a special one-time infusion of up to 40 billion Korean won ($32.34 million) over the next three months to help SsangYong continue running its business while it finds other sources of funding.

Mahindra’s board has also started several measures to bolster its balance sheet in the face of the pandemic, it said.

Friday’s announcement comes less than two months after Mahindra said it would invest $423 million to turnaround SsangYong Motor, which builds sport-utility vehicles (SUVs), and make it profitable by 2022.

Mahindra rescued Ssangyong from near-insolvency in 2010 but despite several attempts it has struggled to revive the SUV maker’s fortunes. The Indian automaker owns a 74.65% stake in the South Korean company.

Reporting by Chris Thomas in Bengaluru; Editing by Aditya Soni