At a time when automobile companies are struggling to survive amid Covid-19 impact, the South Korean subsidiary of Mahindra & Mahindra (M&M), Ssangyong Motor Co (SYMC), has missed repayment worth Rs 480 crore to JP Morgan Chase Bank. Also Read: EPFO Account Credit: 8.5% Interest Likely for Subscribers By End Of December

What’s the amount of outstanding dues?

M&M informed through stock exchanges on Tuesday about the outstanding loans of its subsidiary aggregating to 100 billion Korean Won (around Rs 680 crore). It said of this, Rs 408 crore is from JP Morgan Chase Bank and Rs 68 crore from BNP Paribas, Seoul, and Rs 204 crore from Bank of America NS, Seoul.

"Out of the above mentioned total outstanding amount with these banks, SYMC has missed repayments of... loans aggregating an amount of approx. 60 billion KRW (approx Rs 408 crore) which were due and payable on December 14, 2020," the company said.

What’s the company’s stand?

Even as Mahindra has committed to pay off the above-mentioned loans given by the banks, its final liability will be limited to the extent not recovered from SYMC, it said. "On payment of the dues by the company to the banks, the company will be subrogated to all the rights of the banks against SYMC and the company will step into the shoes of the banks as the creditor, and will be entitled to all rights which the banks had against SYMC, with respect to these loans," Mahindra said.

Why is the loan default a concern?

The default raises concerns because Mahindra & Mahindra board in April had rejected a proposal to pump in any fresh equity in SYMC. The SYMC management and its labour unions had sought funding of $406 million from the company over the next three years.

In 2010, Mahindra had acquired the loss-making automobile firm, but failed to turn it around despite several attempts. M&M holds nearly 75 per cent in the Korean company now and has since invested over $110 million.

SsangYong has been struggling with deteriorating earnings since 2017, when it slipped into the red with a net loss of 66 billion wons as against a net profit of 58 billion wons in 2016.

In 2018, its net loss rose to 62 billion wons and then ballooned to 341 billion wons in 2019.