There are plans to divest a majority stake and Indianise the company.
13 May 2023 | 12165 Views | By Ketan Thakkar
Having explored multiple options for joint ventures and partnerships over the last few years, MG Motor India, the British brand owned by SAIC Corporation has decided to divest its majority stake in the company and it is currently in negotiation with multiple potential suitors – right from High-Net-Worth Individuals, corporates ...
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Having explored multiple options for joint ventures and partnerships over the last few years, MG Motor India, the British brand owned by SAIC Corporation has decided to divest its majority stake in the company and it is currently in negotiation with multiple potential suitors – right from High-Net-Worth Individuals, corporates and financial partners.
With its FDI proposal with the Government of India stuck for several years now, MG Motor was relying on raising ECB loans to sustain the operation. Having managed the operation for almost two years on loans, the company took a critical call of divesting the stake and that too majority stake.
Rajeev Chaba, CEO Emeritus spoke to Autocar Professional on the rationale behind the move and what to look forward to in the coming 5-7 years.
Edited Excerpts:
What is the rationale behind divesting a majority stake in the company?
The tough challenges sometimes also open up many opportunities. I think the situation and circumstances provided this opportunity. We had a challenge in raising funds that opened our eyes and gave us the chance to monetise our brand. By divesting, we will get the funds from the market, and in the process, we can also align with lots of things that the country needs.
We look forward to localising parts, vehicles, and technologies. Apart from component localisation, we will assemble batteries in our factory in 2024 and we are exploring cell localisation in the future probably with a partner. We will also work on improving charging infrastructure amongst many other things.
What is the next step now?
Step one is to find one core partner, which should probably happen this year. Once we get the first phase of funds, it will be deployed into setting up the second plant. The new plant should be up by 2025 and then we hope to build our product portfolio by bringing in 4-5 products predominantly electric vehicles. But frankly, this is a journey that will keep evolving. The first and fourth steps are important. The first step is to find one core partner in terms of shareholding and the fourth step is the IPO. Steps two and three will evolve in between – which we will talk about in due course.
With SAIC becoming a minority partner, will there be a challenge in securing more future products?
Absolutely not. This would not impact supplies of new products and technology. I believe in terms of the supply chain, no country can produce and everything on its own. So, I think globalisation is here to stay and the only question is that based on various geopolitical situations, you need to de-risk your future plans.
The good news for us, as per the plan, is that we will try to indigenise and localise products and technology – which is in line with Make in India. Hopefully, prices will reduce, which is good for the customer. And as you've seen in our existing products also, we are able to give many good features and technology at an affordable price. Step 3.0 (between 2025 to 2028) would enable us to do a lot more. The focus will be on the development of skills, and training in the ecosystem to work on new technologies. While we have already several initiatives with ASDC (Automotive Skills Development Council), we'll accelerate that.
Post the new phase of investment, we would have engaged 20,000 people directly and indirectly in Halol itself. I'm not talking about the multiplier in the economy. As per SIAM's estimate, one car produces 20 jobs in the economy – that is an incremental contribution. Our vision with 3.0 is to bring in new technology, localise it and make it available at an affordable price.
The IP will lie somewhere else, right? How comfortable will SAIC be sharing that?
It's normal for multinationals to own the IP. Multinationals are doing business across industries, across the globe. Even in India, the same thing happens. So there are international norms - technical agreements, license and supplies agreements, and royalties are a part of that. Everyone is governed by these international governance models, and all multinationals follow them. Nothing changes for us and sourcing of products and technologies will continue.
Also read: Exclusive: MG Motor India in talks with JSW Group for 15-20% stake sale at $2 billion valuation