JSW Group Seeks Financial Partner for Automobile Venture with SAIC Motor

The Sajjan Jindal-led JSW Group has outlined plans to involve a financial partner in its newly established automobile venture with SAIC Motor Corporation. Last week, JSW Group disclosed its intention to acquire a 35% stake in the joint venture with China's state-owned SAIC Motor, which will involve the transfer of ownership in MG Motor India to the new entity.

While specific financial details were not disclosed, industry sources suggest that the deal values MG Motor India at Rs. 8,000 crore, with JSW Group committing to invest Rs. 2,800 crore for its 35% stake in the joint venture. This move follows a strategic approach similar to JSW Group's strategy in the steel business, where it previously formed a consortium with Aion Investment for a joint acquisition.

JSW Group is reportedly planning to bring financial investors into the new joint venture, potentially in one or two rounds. The move is aimed at localizing the company and reducing the shareholding of Chinese promoters, facilitating smoother fund-raising to support growth in the rapidly expanding automotive sector.

Vaibhav Shah, Fund Manager at Torus Oro PMS, emphasized the potential for financial investors to provide necessary capital in the fast-growing auto segment over time. The joint venture company has plans to enhance local sourcing, bolster charging infrastructure, expand production capacity, and introduce new models with a focus on green mobility.

SAIC Motor, faced with strong demand, has been seeking fresh investments. However, similar to other Chinese-owned businesses in India, it faced restrictions on bringing in new investments. Meanwhile, MG India, a subsidiary of SAIC Motor, is under investigation for tax evasion and under-invoicing, allegations which the Chinese car maker has denied.

MG Motor, known for selling SUVs under the Hector, Gloster, and Astor brands, as well as electric vehicles like the ZS EV and Comet EV, holds just over one percent market share in India, having sold two lakh cars in the country. The joint venture's strategic objectives include increasing local sourcing, enhancing charging infrastructure, expanding production capabilities, and introducing new models with a focus on green mobility. JSW Steel, a group company, is a major supplier of high-strength steel and advanced products for the automotive segments in India.

HBL