MG Motor India, the British marque owned by China’s largest carmaker Shanghai Automotive (SAIC), is in talks with the JSW Group to divest a part of the company to the homegrown steel major.
- Selling stake would allow MG to meet future expansion plans
- JSW had plans to acquire GM India's plant in 2019
- MG has sold over 48,000 units since April 2022
Like most Chinese-owned companies, MG Motor India is struggling to secure fresh foreign direct investment (FDI) from its parent company and has been relying on external commercial borrowings from SAIC to keep its operation afloat. The carmaker, which has its plant in Halol, Gujarat, has been fundraising for close to a year and has explored over a dozen potential investors who could acquire a stake in the company.
MG India's plans to procure investment
Our sister publication Autocar Professional learns that MG Motor is seeking a valuation of $2 billion-2.5 billion (Rs 16,494 crore to Rs 20,617 crore), and is in talks with JSW Group for a 15-20 percent stake dilution. This may lead to a fund infusion of Rs 2,000 crore-3,000 crore in the company. The carmaker currently retails five SUVs – Astor, Gloster, Hector 5-seater, Hector Plus and ZS EV – and is set to launch the compact two-door EV, the Comet, on April 26.
“Amongst various investors and companies engaged by MG Motor so far, the talks with JSW Group are progressing well, and if both companies agree on the valuation, the deal may be signed in weeks if not months," said one of the sources. "If all goes well, the deal is likely to be closed in 4-8 weeks.”
The negotiations, if fructified, would offer MG Motor a much-needed monetary line, beyond loans, to meet its future expansion plans. For JSW Group, this will mark its entry into the automotive segment, something which has been on the drawing board since 2018. JSW, in fact, was almost on the final leg of acquiring GM India’s Talegaon plant in 2019, but dropped its plans later. Sources say, GM upped the price for the Talegaon plant at the last minute, which JSW was not agreeable to.
On a specific query from Autocar Professional on the deal with JSW Group, Rajeev Chaba, president and MD of MG Motor India, dropped a hint saying, “We are taking one step at a time. Then we will look at what next. We are working with various agencies and institutions and very soon, we should be able to announce something.”
JSW Group’s CFO recently told that the company intends to manufacture four-wheelers, but gave no further details on the manufacturing location or investments.
The company’s deputy MD and board member Jayant Acharya told Autocar Professional last week that "it (plans to enter car business) is being worked out."
MG Motor India’s growing need for a second plant
MG Motor entered India in September 2017 by acquiring General Motors India’s Halol plant. It has been manufacturing vehicles for around five years, but since the factory is over a decade-and-a-half old, there are limitations to its capacity and the extent to which it can be expanded. Hence, it has been actively exploring a second plant in India for a couple of years.
The SUV specialist has already invested close to Rs 5,000 crore in India and was ready to infuse a similar amount, but the FDI proposal has been stuck with the government of India since 2020, post numerous skirmishes at the India-China border, which soured relations between the two countries.
MG Motor India, which recorded sales of 48,866 units between April 2022 and March 2023 (FY2023), is eying speedy growth this year. It has targeted sales of 80,000 to 1,00,000 units, provided its supply chain scenario improves. Chaba hopes to break into profits in FY2024 and utilise the complete plant capacity by 2024. Hence, the company is currently in need to define its new blueprint. It will take at least a couple of years in setting up a new factory as well as prepare products to complement its existing range of products.
In India’s highly competitive passenger vehicle and utility market, MG Motor India has been successful in establishing a strong mindshare with buyers even though its market share has remained sub-2 percent. Its portfolio of SUVs and EVs has been a key differentiator in the marketplace. Its bullishness on electric mobility is reflected in the investment of almost $100 million (Rs 825 crore) to launch the new compact EV Comet and penetrate deeper into the fast growing zero emission vehicle market in the country.
India has been a key base for SAIC in its internationalisation push, and China's largest car maker is keen to use India as a key hub for exports in the future.
Autocar Professional contacted both companies for their comments. While a JSW Group spokesperson replied by saying “No comments”, an MG Motor India spokesperson said, “As per company policy at MG Motor, we do not comment on speculation.”
MG Motor India’s decision to sell stake happens amid struggles to get FDI clearance from the government of India. It’s the same reason why the likes of Great Wall Motors, Changan and Foton, which despite spending years in India, decided to exit the market amid geo-political tension.
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