China’s SAIC is the ultimate winner in MG Motor India deal with JSW Group  

MG Motor India to transfer entire operations to the JV.

SAIC Motor Corporation, the Chinese state-owned parent of MG Motor India, is poised to generate handsome returns on its India investments, following the announcement of its joint venture with Sajjan Jindal’s JSW Group.

The financial details of the joint venture, in which JSW holds a 35 percent stake, and to which MG Motor India’s entire operations are expected to be transferred, have not yet been made public. But people familiar with the development say MG Motor’s business has been valued at Rs 8,000 crore and JSW will invest around Rs 2,800 crore.

JSW is likely to induct more financial investors into the the joint venture company at different time intervals, potentially at higher valuations. SAIC will benefit from each higher valuation, as it gradually dilutes its stake in the new joint venture company, which is expected to go public in the next few years.

It is expected that the initial fund infusion into the JV in the form of primary equity by JSW group and later investments will be a combination of primary equity as well as secondary stake sale by SAIC.

SAIC, the biggest Chinese government car maker, is estimated to have cumulatively invested Rs 3,000 crore in India. Email queries sent to JSW group remained unanswered until press-time and an MG India spokesperson said that the company does not have additional information to share at this point in time.

MG Motor sells SUVs under the Hector, Gloster. and Astor brands and the ZS EV and Comet EV models of electric vehicles. It has just over 1 percent market share in the country and has so far sold two lakh cars here. Like many Chinese-owned businesses in India, MG Motor has been prohibited from securing fresh investments from its global parent for its India business, prompting a search for an investor. In a joint statement on November 30, SAIC Motor and JSW Group said they would create strategic synergies by pooling resources in the fields of automobiles and new technology.

The JV is set to undertake various initiatives, including enhancing local sourcing, improving charging infrastructure, expanding production capacity, and introducing a broader range of vehicles with a focus on green mobility. MG India is under investigation for tax evasion and under-invoicing and it vehemently denies both. It began commercial operations in India in 2019 by acquiring General Motors’ Halol plant in Gujarat, paying less than $50 million to the American automaker. The deal was in every sense a distress deal for GM which was exiting India after having sunk close to a billion dollars.