Sajjan Jindal-led JSW Group could get a hold in the automobile industry by buying stake in MG Motor India, owned by China’s largest car company, Shanghai Automotive. The two companies are in talks which could lead to JSW Group acquiring 15 to 20 per cent stake in MG Motor for anywhere between ₹2,000 crore and ₹3,000 crore..
The Indian conglomerate, which is mainly into steel, cement and paints sectors, has been looking to enter the auto space for the last three years as part of its diversification strategy.
On the other hand, MG Motor India is finding it difficult to raise money from China due to the restrictions imposed by the government.
Sources told businessline that the deal could value MG Motors at $1.5 billion although the Chinese company is understood to have pegged the valuation at $2-2.2 billion..
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Incidentally, MG Motor India had announced that it had invested about ₹800 crore to produce its electric car Comet locally at its plant in Halol, Gujarat. With the Comet due to be rolled out soon, it will be the second electric vehicle by the British carmaker after the ZS EV, which was launched in India in 2020.
JSW Group had announced plans to make an entry into the high-end electric vehicle space and was looking up to buy technology so this will be a good opportunity for getting a foothold in the automobile space, the source said.
In its pursuit of the automobile venture, JSW Group had almost finalised the deal to acquire GM India’s Talegaon plant in 2019 but dropped the plan due to economic headwinds unleashed by Covid pandemic..
When reached for comments, JSW Group spokesperson declined to comment. JSW Group flagship JSW Steel plant at Salem in Tamil Nadu manufactures one million tonne per annum of high-value steel to automobile companies including the EV makers.
Ashwin Patil, Senior Research Analyst at LKP Securities, said JSW Group entry into EV space through MG Motor will enable them to secure a pie out of the expanding EV space as issue around EV infrastructure is fast easing with new launches from Maruti Suzuki, Tata Motors and M&M are fetching solid demand.
The Group is not averse to getting in partnership for getting high-end technology. JSW Steel had partnered with Japan’s JFE Steel Corporation to establish a grain-oriented electrical steel sheet manufacturing and sales joint venture company in India.
FUNDING CRUNCH
Incidentally, a proposal for foreign direct investment of MG Motor India is pending with the government for its clearance.
The automobile major has been relying on external commercial borrowings from the parent company to support operation in India.
MG Motor India, which has a plant at Halol in Gujarat, makes five SUVs – Astor, Gloster, Hector 5-seater, Hector Plus, and ZS EV.
MG Motor entered India in September 2017 by acquiring General Motors India’s Halol plant. It has been manufacturing vehicles over the past four to five years and looking to modernise the plant for introducing new models.
The auto company has already invested about ₹5,000 crore in India and was ready to infuse a similar amount, but the FDI proposal has been stuck with the government of India since 2020. MG Motor India has reported that its sales were up 21 per cent at 48,866 units in FY23.
Sachidanand Updadhyay, MD, Lord’s Mark Industries, said there is an urgent need to develop an enabling policy and regulatory framework to encourage a more broad-based public-private partnership so that the charger point to EV ratio can be improved to at least 1:30 in the next five years. Countries such as China and Norway which have made rapid progress in EV adoption have always been focusing on the development of a broad public charging infrastructure, he said.
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Manish Chowdhury, Head of Research, Stoxbox said the EV space in India is on the cusp of a paradigm shift in terms of adoption, with electric vehicle market in India expected to witness 49 per cent CAGR between 2022-30 period as per the Economic Survey 2023 (10 lakh EVs sold in 2022).
Also, the EV sector is likely to benefit from the government’s thrust to reach a 30 per cent electrification target for the country’s vehicle fleet by 2030 and has introduced several initiatives such as FAME-II, PLI, reduction in custom duties for Lithium-ion batteries for EVs, he said.
EV story is well-positioned to take a big leap going forward with advanced technology especially on the battery side, new manufacturing hubs and increased push for improving charging infrastructure in the country, he added.