New Delhi: Auto major Mahindra & Mahindra (M&M) today said it will invest 80 billion Korean Won (about $73.73 million) on its Korean subsidiary Ssangyong Motor Co (SMC), through subscription of a preferential allotment.
The board of SMC at its meeting today approved of a third party allotment (Preferential Offer) to the company (M&M) of 1,45,45,455 equity shares at an issue price of 5,500 Korean Won per share for an amount aggregating around 80 billion Korean Won.
"...the company (M&M) has decided to subscribe to the aforesaid offer and invest an amount aggregating around 80 billion Korean Won (equivalent to around $73.73 million at the current rate of exchange)," the company said in a filing to the BSE.
The said preferential offer would result in an increase in the paid-up capital of SMC by 11.9 percent and increase in M&M's stake in SMC to 72.85 percent from 69.63 percent. The said issue would facilitate improvement of the financial structure of SMC and proceeds of the issue would be utilised by SMC for new product development and strengthen its competitiveness, the company added.
Commenting on the development, M&M President Automotive and Farm Equipment Sectors Pawan Goenka, who is also the Chairman SMC board, said: "This paid-in capital increase reflects Mahindra's strong commitment to support Ssangyong Motor in its efforts to achieve an early turnaround.
"By expanding investment in Ssangyong and creating tangible synergy in various areas such as sales, product development and sourcing, we will continue to increase our global competitiveness." SMC CEO Lee Yoo-il, said the decision on paid-in capital increase will enable the company to secure necessary investment funds and at the same time, strengthen its financial position.
"Furthermore, as we carry out the investments in new models, including a small CUV, our product development will also gain momentum," Yoo-il added. Mahindra invested a total of KRW 522.5 billion in March 2011 (new paid-in capital increase of KRW 427.1 billion and 95.4 billion in corporate bonds) to acquire 69.63 percent of the equity in SMC.
It had also approved an investment of KRW 295.8 billion at the first Board Meeting held in February 2012 for development of new engines and a small CUV project.