Utility vehicle maker Mahindra & Mahindra is shutting down its GenZe electric scooter subsidiary in the United States and is looking to give up ownership control in its South Korean arm Ssangyong, in which it had already decided to not make any more investments, as it takes a tough call on capital allocation amid losses in its international businesses and seeks to navigate the challenges posed by the COVID-19 pandemic.
“In terms of path forward, our board has tightened capital allocation norms. It has said no, we will not invest more in Ssangyong. We are shutting down GenZe and are closely looking at many other businesses. We are very serious about acting decisively on all loss making subsidiaries,” Anish Shah, deputy managing director and CFO at Mahindra & Mahindra, said on Friday.
The maker of the Scorpio SUV reported a standalone net loss of Rs 2,510 crore in the January-March quarter, versus a profit of Rs 849 crore a year ago. M&M recognised a loss of Rs 2,780 crore in the quarter ended March 31, 2020 as exceptional items on account of impairment provision for certain long-term investments, it said. The nationwide lockdown imposed towards the end of March to curb the spread of the COVID-19 pandemic, also hurt the company’s earnings.
Even as it shuts down GenZe, the company is not looking to exit the US market completely, where it also sells farm equipment and the Roxor SUV.
“We have been struggling in the (GenZe) business for some time, in terms of volume that we are getting for electric bike and electric scooters. We are liquidating all the stocks that we have and within 3-6 months we will shut. Roxor is going on well, in fact in the last couple of months we have had the strongest retail that we have seen for Roxor. A new variant of Roxor will be launched later this year, that project continues,” said Pawan Goenka, M&M’s managing director.
Elsewhere, the company is also seeking a new investor in Ssangyong Motor Company. In April this year, M&M’s board had decided on not making any more investments in the ailing South Korean SUV maker. However, as of now, M&M has no plan to sell it off completely.
“Ssangyong needs a new investor and we are working with the company to see if we can secure investments for Ssangyong. Mahindra will not invest and there is no specific plan of exiting the company. If the new investor comes in with sufficient investment, we clearly won’t remain the majority or number one shareholder,” said Goenka.
Some of Mahindra’s international businesses continue to do well. For instance, there is good market momentum for Peugeot Scooters in Europe, as there is a growing demand for personal mobility amid the COVID-19 pandemic. There has also been a huge uptick in demand for Peugeot Scooters in China, said Rajesh Jejurikar, executive director at M&M. Its tractor business in Turkey is also doing well, he added.
Meanwhile, Project K2, which is a collaboration between Mahindra and Mitshubishi’s agri-machinery business in Japan, is looking at four completely new platforms, derived from Mitsubishi’s existing platforms. There will be four new lightweight platforms, which will strengthen Mahindra’s presence in farm equipments in the USA, South East Asia and Japan, said Jejurikar.
In the domestic market, the company has zeroed down on nine businesses, which it feels could be scaled up in the coming years.
“There are nine companies that we have today that are very well positioned for us to scale them up. They include our agri-business, which is a strong business in the field of agri inputs in particular and also fruits and vegetables; that includes Susten, our solar business; it includes our aftermarket business, where in used cars we have got the best physical infrastructure and we are building a digital infrastructure around that. Classic Legends, our Jawa motorcycle business, has momentum and there are multiple other businesses we feel are very well positioned to grow over the next 2-3 years,” said Shah.
Some of these business could also hit the capital market via an initial public offering, in the coming years, he added.
In its core utility vehicle business, the new model of the Thar SUV will be launched in the early part of the second half of the year ending March 2021. Two new SUV platforms codenamed W601 (next generation XUV500) and Z101 (next generation Scorpio) are also in the works.
