MG Motors India planning to raise funds locally for its expansion plans

8 Jul 2022 , 11:01 AM

Great Wall Motor, China's leading SUV manufacturer, was forced to abandon its $1 billion India development plan. At the same time as MG Motor, Shanghai Automotive's Indian affiliate, is working extra hard to raise money locally to begin the next stage of its expansion in the nation.

Due to the Indian government's opposition to its proposal to bring in foreign direct investment from China, MG Motor has already begun discussions with almost a dozen fund houses to finance $300—600 million locally. According to news reports, the acquisition will probably be finalized before the end of the fiscal year.

The MG Hector manufacturer's next phase of growth comprises boosting production capability and tripling the product lineup to 10 models, with a strong emphasis on electric vehicles and extensive localization. The required investment will be close to Rs5,000 crore. It has hired a UK-based consultancy company to assist with capital raising.

With a number of international private equity investors and funds with an emphasis on ESG (environmental, social, and governance) profiles, the company has been in advanced conversations. In order to attract new investors, it is considering establishing an EV subsidiary similar to Tata Motors.

MG Motor India would get medium-term cash from the proposed fundraising to expand operations. According to news reports, the likely withdrawal of private equity investors in the ensuing few years may result in a local listing on the stock exchanges.

After the pandemic, MG Motor India committed Rs2,000 crore to increase volumes while also securing funding through local and international commercial financing.

The company plans to build a new facility in order to enhance the capacity of its Halol plant to roughly 1,30,000 units this year and to 3,00,000 units in the next several years. It intends for EVs to make up almost a third of its whole output. These would all need new investments.

The company plans to build a new facility in order to enhance the capacity of its Halol plant to roughly 1,30,000 units this year and to 3,00,000 units in the next several years. It intends for EVs to make up almost a third of its whole output. These would all need new investments.

According to MG Motor India's filings with the Ministry of Corporate Affairs, the company had borrowed more than Rs742 crore and had net debt of Rs255 crore at the end of FY21.

The company aims to use 60% of its production capacity as part of its expansion effort in order to break even. For this reason, it is also boosting the proportion of local parts in its vehicles from 60% to 75%.

Due to supply chain issues and import constraints, MG Motor is finding it difficult to increase volumes in India and sell more than 4,000—5,000 automobiles each month.

According to business information portal Tofler's access to MG Motor's Ministry of Corporate Affairs annual filing, the company reported sales of Rs4,529 crore in FY21, an increase of 80% over the previous year. It reported a net loss for FY21 of Rs715 crore, bringing the total loss since FY18 to over Rs1,720 crore.