MG Motor, owned by China’s SAIC Motor Corp, is planning to raise USD 350-500 million (Rs 2,650-3,800 crore) in private equity in India to fund its future needs, including expansion in electric vehicles (EVs). The maker of the Hector and Astor SUVs is seeking to tap the local market because of a delay in getting government approval for new investment from the Chinese parent.
MG Motor India has already initiated talks with private equity investors, several people in the know told ET.
The company is exploring setting up an EV subsidiary to bring in new investors. MG Motor may later go for a local public listing to provide an exit route to private equity investors or the parent may buy back their stake, said one of the people.
An email sent to MG Motor India seeking comment did not elicit any response till press time Friday.
Managing director Rajiv Chaba had told ET last year that the company was considering investing about Rs 2,000 crore to expand capacity and bring in new products.
It plans to launch a range of EVs, from a small hatchback with a starting price under Rs 10 lakh, to a compact SUV and high-end D-segment SUV.
The compact EVs may be based on the GS or Global Small EV platform jointly developed by SAIC-GM, which may cater to emerging markets, including India and Indonesia. The C- and D-segment EVs meant for India may come from the Sigma platform.
The EV hatchback, with a range of 200 km on full charge, will be the first off the mark and will hit the roads in the first quarter of 2023.
Gaurav Vangaal, associate director at S&P Global Mobility, said given the abundant capital available from green funds worldwide, it was prudent to raise money through private equity.
“Frugal Chinese technology has serious potential in the Indian market. Given that SAIC EVs are well proven in the Chinese market, showcasing capability and attracting interest from private equity investors may not be a challenge. Given the delays so far, how quickly the company will be able to operationalise its plans will be critical for its success,” added Vangaal.
MG Motor also plans to localise battery cells in the domestic market and has already applied for the government’s production-linked incentive scheme. But that too requires approval for direct investment, and Chaba had told ET that the company was working with the government on compliances.
SAIC entered India through its British brand MG in 2019 with a committed investment of Rs 4,500 crore. The company has put in Rs 2,500 crore in India but has been waiting for approvals for over 18 months to bring in more foreign investment. The delay has happened amid India’s increased scrutiny of investment coming from countries it shares a border with, after the skirmishes on the Sino-India border.
MG Motor is struggling to ramp up volumes in India and sell beyond 4,000-5,000 vehicles a month because of restrictions also on imports of components from China.
According to MG Motor’s latest annual filing available from the Ministry of Corporate Affairs, shared by business information platform Tofler, the company had posted a net loss of Rs 665 crore on revenue of Rs 2,512 crore in the fiscal year ended March 31, 2020. It had incurred an accumulated loss of around Rs 1,000 crore between FY18 and FY20, but Chaba, in his interview to ET in 2021, had said the operations would break even in FY23.
MG Motor is considering alternative options at a time when green funds around the world are putting billions of dollars into EV businesses of automakers.
Last year, India’s Tata Motors announced plans of raising USD 1 billion in its EV business at a valuation of USD 9 billion. Recently US-based impact fund Causis Mobility said it would invest USD 6-8 billion in India to participate in its EV-based public transport system. Ashok Leyland, the country’s second-largest truck maker, has set up a separate arm, Switch, to raise funds for its electric vehicles business.
On Thursday, news wire Reuters reported that SAIC might dilute a 10-30% stake in MG Motor India. The company has hired an Indian law firm and a transaction adviser for the fundraising.
SAIC owns MG Motor India through SAIC Motor HK Investment.
MG Motor sold 40,734 vehicles in India in 2021, an increase of 35% from the previous year, accounting for less than 1% of the parent’s consolidated volume. At SAIC, global sales dropped 2.45% last year to 5.46 million vehicles, data on the Chinese company’s website show. The volume growth of the Indian subsidiary was one of the fastest for SAIC in its major markets.
According to SAIC’s annual report of 2020, MG India had a total installed capacity of 56,000 vehicles. This implies the utilisation of the Indian operation rose to 72% in 2021 from 54% the previous year. Typically, automakers start planning capital expenditure to increase installed capacity when plant utilisation crosses 70-75%.
(With inputs from Sharmistha Mukherjee in New Delhi)
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