Jindal Group has been in the news in recent times with Savitri Devi Jindal, the Chairperson Emeritus of JSW Steel, becoming the 7th richest person of India, the JSW Infrastructure IPO, in which the company raised funds for expansion and paid off its debt, and now news of Sajjan Jindal finalising terms of an agreement to buy a stake in MG Motor India.
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. According to insiders familiar with the deal, the valuation of MG's local business could potentially reach $1 billion. Both sides are currently engaged in legal documentation, and the formal announcement is expected to be made later this month or by Diwali. The plan is to schedule the rollout of electric cars under the aegis of the new corporate alliance by January 2024.
The broad deal is set to be implemented in multiple stages. In the first phase, a private entity affiliated with Jindal will hold 32–35% of MG Motor India during the initial phase, while SAIC will maintain a majority stake of 51%. An Indian financial institution will own about 8% of the equity, while Indian dealers of MG and its local employees will collectively acquire 6-7 percent.
The losses accumulated thus far will be written off against the equity capital of SAIC to avail of the tax benefits associated with loss-making companies. Once the losses are wiped out, an initial public offer from MG Motors India is proposed, even before the alliance talks began. The IPO will be structured as an Offer for Sale (OFS), in which existing investors, particularly SAIC, will offload their shares. After the IPO, Chinese ownership will come down to around 38–40% over time, while Sajjan Jindal’s ownership will go up to 49%, with an eventual pathway to 51%. Employees and dealers in India may collectively own around 8–9 percent of the company. 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.
MG Motors India's sales volume and installed capacity have stagnated in the past two years due to financial roadblocks. Despite receiving positive feedback for its early models, sales volume reached only 50,000 units. The company has focused on profitability and broke even at the cash level in March 2023. The cumulative loss since FY18 has been around Rs 1,720 crore. The company's turnover was Rs 5,255 crore in FY22, and its net worth is Rs 456 crore. MG Motors has sold around 170,000 units in India, with average sales volumes ranging from 3,800 to 4,200 over the past 15 months. The company plans to set up a second manufacturing facility in Gujarat, aiming to increase its cumulative installed capacity to 300,000 units by 2028. JSW Group is also in pursuit of Ford's Chennai plant, with industry analysts predicting aggressive competition from Mahindra and Mahindra. MG's sales in FY23 increased by 21% compared to FY22's sales.