Sajjan Jindal, SAIC finalise terms of agreement to buy stake in MG Motor India

The venture will not involve JSW Steel and JSW Energy, which are the listed firms of the JSW Group.

JSW Group chairman Sajjan Jindal and Shanghai-based SAIC Motor Corp have reached a final agreement on the terms for a grand alliance involving MG Motor India, the wholly-owned subsidiary of the Chinese automaker that owns the British automotive brand Morris Garages, a newspaper report has said. Insiders familiar with the cross-border deal revealed that the valuation of MG's local business could potentially reach $1 billion.

A formal announcement, barring any last-minute changes, is expected to be made later this month or by Diwali. The objective is to rollout electric cars via the new corporate alliance by January 2024. At present, both parties are actively involved in the legal documentation process, the Economic Times reported on October 5.

Moneycontrol could not verify the report independently.

Also Read: MG Motor India exploring options for a second plant in country

The broad deal, set to unfold in multiple stages, outlines that initially, a private entity affiliated with Jindal will hold 32-35 percent of MG Motor India during the initial phase, while SAIC will maintain a majority stake of 51 percent. An Indian financial institution is slated to own approximately 8 percent equity, and Indian dealers of MG along with the local employees will collectively acquire 6-7 percent, the report said.

Sources, meanwhile, told the publication that the venture would not involve JSW Steel and JSW Energy, which are the listed entities of the JSW group.

The losses accrued up to this point will be written off against the equity capital of SAIC. A phased approach for the change of control is being contemplated to leverage the tax benefits linked with companies experiencing financial losses, according to the financial daily.

“As stated previously, we are evaluating all options to grow our presence in the country and create a win-win situation for all stakeholders while keeping customers’ interests at the core. This would encompass bringing world-class technology, enhancing localisation, and retaining pole position in customer satisfaction for both sales and aftersales. We decline to comment on the query as it is speculative”. said the company.

Also Read: MG Motor plans to raise funds by selling stake to local partners, investors

Once the losses are mitigated, an Initial Public Offering (IPO) for MG Motors India is planned, initially proposed even before the alliance negotiations started. This IPO will be structured as an Offer for Sale (OFS) in which existing investors, particularly SAIC, would offload their shares.

After the IPO, the Chinese ownership is likely to reduce to around 38-40 percent gradually, while Sajjan Jindal’s ownership will increase to 49 percent, potentially paving the way to majority ownership at 51 percent. Additionally, employees and dealers in India may collectively own around 8-9 percent of the company.

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Despite the rise in losses, the valuation of MG Motors India is likely to be finalised at approximately Rs 7,000-8,000 crore, significantly lower than the initial demand of $8-10 billion.

As the Chinese ownership drops below 49 percent, MG Motors will undergo a transformation, ceasing to be predominantly a Chinese company. The board and management will see a shift towards majority Indian representation, signifying a significant change in the company’s governance. Plus, the company is planning to adopt a new brand identity that represents the corporate identities of both partners involved. Furthermore, the venture is actively looking to appoint a new CEO to lead the company in this new phase of collaboration.

Also Read: JSW Group working on plans to make its own EVs: Sajjan Jindal

“The objective from the beginning has been to make it an Indian company. MG Motors is in dire need of expansion capex,” an official privy to the talks told the business daily.