Over the last 18 months, Mahindra has been on a
diversification spree through acquisitions and joint ventures,
entering the heavy, medium and small trucks segment where Tata
Motors (TAMO.BO: Quote, Profile, Research, Stock Buzz)is the leader and into the two-wheeler market
with ambitions of making scooters and motorcycles.

Its shares have risen 14.5 percent so far this year,
compared with a 5.5 percent rise in the main index .BSESN and
a 31 percent rise in Tata.

TOO MUCH TOO FAST?

Analysts feel multiple moves at the same time would be a
drain on Mahindra’s cash flows and the stock could enter a
phase of underperformance in the next 18-24 months.

“More than Ssangyong, its foray into the heavy commercial
vehicles sector is an immediate overhang on the stock,” said
Jatin Chawla, sector analyst at India Infoline, which has a
buy’ on the stock.

Mahindra will also have to spend on Logan, the car it is
now selling after buying out Renault’s (RENA.PA: Quote, Profile, Research, Stock Buzz) stake in a
joint venture and new 2-wheelers, which is now a loss-making
business.

Analysts are also concerned it would take two to three
years for Mahindra to benefit from the Ssangyong acquisition,
which would require substantial investment for product
development.

With about 70 percent of Ssangyong’s sales to Europe,
currency fluctuations also pose a substantial risk.

“For now, I would stay away from the stock until I have
more clarity. It looks expensive as of now,” said Rakesh Rawal,
head of private wealth management at Anand Rathi. Rawal manages
around $1 billion of wealth for his clients.

EUROPE WITHIN REACH

Still, some remain optimistic. With Ssangyong, Mahindra
would be inheriting a debt-free company, whose products are at
least two development cycles ahead of Mahindra’s.

“The acquisition is definitely a strategic fit for
Mahindra. It does not clash with its existing bouquet of
products,” said Shishir Bajpai, senior vice-president of
equities business at IIFL Wealth Management.

Ssangyong’s SUV’s are already Euro V compliant and will be
Euro VI compliant soon, while India is still now meeting Euro
IV emission standards. A ready market opens up for Mahindra in
Europe, Russia, South America, Middle East, Africa and Asia,
where Ssangyong exports.

“Ssangyong buy makes a lot of sense for them. It is their
step towards establishing a global footprint,” said Bajpai,
adding he was positive on Mahindra & Mahindra.

Analysts said it would take a while for all its new
products to get stabilised and start generating positive cash
flows, but businesses such as heavy trucks, which are high
margin, would boost profitability.

“Mahindra has ventured in many areas and their track
record so far shows they have been right with their decisions
and timing,” Arun Kejriwal, director with research firm KRIS.
“Their core business – utility vehicles and tractors are doing
very well. So, if other ventures take time to deliver, it is
not a worry,” Kejriwal said adding he has a positive view on
the stock. (Editing by Jui Chakravorty and Valerie Lee)

SUV maker Ssangyong, which is in bankruptcy protection, said Mahindra, India’s top utility vehicle maker, had been chosen after making the highest bid and securing financing plans. No financial details were disclosed, however, and the uncertainty helped send Ssangyong shares down more than 8 percent.

Sources told Reuters last week that Mahindra was willing to pay up to $400 million to acquire a majority stake in Ssangyong as it seeks to become a major global utility vehicle maker.

The deal will help Mahindra build a worldwide footprint as the Korean maker of the Rexton and Kyron SUVs and the Chairman luxury sedan also exports to Russia, Europe, China, and the Middle East.

But some analysts said it would take a while for Mahindra to see benefits from the deal with Ssangyong, which holds only 2 percent of the Korean market, is under court-led restructuring and has a debt pile of about $634 million. It also has a history of labour disputes.

“The acquisition could be slightly negative for Mahindra in the near term because Ssangyong is a small player and scalability is limited. So Mahindra will have to make some investments,” said Surjit Arora, auto analyst with brokerage Prabhudas Lilladher.

“I am guessing it would take two to three years for Mahindra to turn around the company.”

Mahindra said it would invest in Ssangyong’s product portfolio, but added that the Korean automaker would continue operating as an independent entity with Korean management.

Mahindra’s Chief Financial Officer Bharat Doshi told reporters Thursday afternoon its bid money would be used to settle Ssangyong’s long-term debt.

EMERGING MARKET AUTOMAKERS GROW

Automakers from emerging markets such as India, South Korea and China have become increasingly important on the global stage in recent years.

Korean market leader Hyundai Motor was a clear winner during the global crisis, stealing market share and growing profits as U.S. rivals struggled to survive.

China’s Geely completed its purchase of Volvo cars from Ford Motor this month, while Mahindra and Tata Motors fought in 2008 to buy luxury brands Jaguar and Land Rover from Ford.

India’s Ruia group, which also bid for Ssangyong and was named a reserve bidder, purchased tyremakers Dunlop and Falcon Tyres.

Shares in Ssangyong dropped 8 percent on Thursday amid uncertainties over the deal as it struggles with about 740 billion won ($626 million) in debt and needs fresh capital to increase investment.

The stock plunged by the daily limit of 15 percent on Wednesday after Renault-Nissan pulled out of the bidding earlier this week, raising concerns that it may fail to find a buyer.

Mahindra shares edged up 0.7 percent in a flat Mumbai market.

The deal, if agreed, will mark a third change of main shareholder for Ssangyong. Now defunct Daewoo group took over the company in 1998 and Ssangyong was sold in 2004 to China’s top automaker SAIC Motor Corp, but both failed to grow the automaker to challenge Hyundai.

It would also mark the second investment by an Indian automaker in Korea after Tata Motors bought Daewoo’s commercial vehicle arm in 2004.

Ssangyong said the final acquisition price would be decided in October after due diligence. It plans to close the deal in November.

After a dismal 2009 and nearly two months of strikes to block layoffs, Ssangyong has been recovering fast from one of the industry’s worst ever downturns. Its sales more than trebled in the first seven months of this year to 43,811 vehicles.

(Additional reportng by Seo Jiwon in Seoul; Writing by Miyoung Kim and Jui Chakravorty; Editing by Jonathan Hopfner and Lincoln Feast)

(For more business news on Reuters India click in.reuters.com)

SUV maker Ssangyong, which is in bankruptcy protection,
said Mahindra, India’s top utility vehicle maker, had been
chosen after making the highest bid and securing financing
plans. No financial details were disclosed, however, and the
uncertainty helped send Ssangyong shares down more than 8
percent.

Sources told Reuters last week that Mahindra was willing to
pay up to $400 million to acquire a majority stake in Ssangyong
as it seeks to become a major global utility vehicle maker.
[ID:ID:nSGE67502H]

The deal will help Mahindra build a worldwide footprint as
the Korean maker of the Rexton and Kyron SUVs and the Chairman
luxury sedan also exports to Russia, Europe, China, and the
Middle East.

But some analysts said it would take a while for Mahindra
to see benefits from the deal with Ssangyong, which holds only
2 percent of the Korean market, is under court-led
restructuring and has a debt pile of about $634 million. It
also has a history of labour disputes.

“The acquisition could be slightly negative for Mahindra in
the near term because Ssangyong is a small player and
scalability is limited. So Mahindra will have to make some
investments,” said Surjit Arora, auto analyst with brokerage
Prabhudas Lilladher.

“I am guessing it would take two to three years for
Mahindra to turn around the company.”

Mahindra said it would invest in Ssangyong’s product
portfolio, but added that the Korean automaker would continue
operating as an independent entity with Korean management.

Mahindra’s Chief Financial Officer Bharat Doshi told
reporters Thursday afternoon its bid money would be used to
settle Ssangyong’s long-term debt.

EMERGING MARKET AUTOMAKERS GROW

Automakers from emerging markets such as India, South Korea
and China have become increasingly important on the global
stage in recent years.

Korean market leader Hyundai Motor (005380.KS: Quote, Profile, Research, Stock Buzz) was a clear
winner during the global crisis, stealing market share and
growing profits as U.S. rivals struggled to survive.

China’s Geely completed its purchase of Volvo cars from
Ford Motor (F.N: Quote, Profile, Research, Stock Buzz) this month, while Mahindra and Tata Motors
(TAMO.BO: Quote, Profile, Research, Stock Buzz) fought in 2008 to buy luxury brands Jaguar and Land
Rover from Ford.

India’s Ruia group, which also bid for Ssangyong and was
named a reserve bidder, purchased tyremakers Dunlop (DUNL.BO: Quote, Profile, Research, Stock Buzz)
and Falcon Tyres (FLTR.BO: Quote, Profile, Research, Stock Buzz).

Shares in Ssangyong dropped 8 percent on Thursday amid
uncertainties over the deal as it struggles with about 740
billion won ($626 million) in debt and needs fresh capital to
increase investment.

The stock plunged by the daily limit of 15 percent on
Wednesday after Renault-Nissan (RENA.PA: Quote, Profile, Research, Stock Buzz) (7201.T: Quote, Profile, Research, Stock Buzz) pulled out of
the bidding earlier this week, raising concerns that it may
fail to find a buyer.

Mahindra shares edged up 0.7 percent in a flat Mumbai
market.

The deal, if agreed, will mark a third change of main
shareholder for Ssangyong. Now defunct Daewoo group took over
the company in 1998 and Ssangyong was sold in 2004 to China’s
top automaker SAIC Motor Corp (600104.SS: Quote, Profile, Research, Stock Buzz), but both failed to
grow the automaker to challenge Hyundai.

It would also mark the second investment by an Indian
automaker in Korea after Tata Motors bought Daewoo’s commercial
vehicle arm in 2004.

Ssangyong said the final acquisition price would be decided
in October after due diligence. It plans to close the deal in
November.

After a dismal 2009 and nearly two months of strikes to
block layoffs, Ssangyong has been recovering fast from one of
the industry’s worst ever downturns. Its sales more than
trebled in the first seven months of this year to 43,811
vehicles.
($1=1182.0 Won)
(Additional reportng by Seo Jiwon in Seoul; Writing by
Miyoung Kim and Jui Chakravorty; Editing by Jonathan Hopfner
and Lincoln Feast)

The company sees strong potential for the trucks business globally, for which it is exploring synergies with partner Fiat, Group Chief Executive and Managing Director Carl-Peter Forster told reporters. Tata currently has a joint venture to sell Fiat-branded cars such as Linea, Grande Punto and the Palio in India.

The firm is also looking to build a plant in India to manufacture small trucks.

“In commercial vehicles, we are a dominant player in India. Tata has all the ingredients to be and it is our ambition to be a big player globally,” Foster said.

Fifty-five year old Forster, who joined Tata from General Motors Europe earlier this year to bolster its international ambitions, said new products from the company’s luxury brand stable of Jaguar and Land Rover were being well received.

The company now plans to come up with a modern-day Defender Land Rover model.

Earlier this week, Tata, India’s leading vehicle maker with about two-thirds of the Indian market, swept past forecasts with a fourth straight quarterly profit, driven by demand for JLR. The results boosted its shares to their highest in at least two decades.

Tata’s results come amid a surge in demand for cars, trucks and buses in India. Car sales in India hit a record high in July, jumping 38 percent from a year earlier, boosted by the launch of new models and the strong economy.

It makes utility vehicles such as the Safari, Tata Magic and Winger and cars such as the ultra-cheap Nano, Tata Indica and the premium sedan Indigo Manza.

(Writing by Prashant Mehra; editing by Surojit Gupta and Jui Chakravorty)

(For more business news on Reuters India click in.reuters.com)

The company sees strong potential for the trucks business
globally, for which it is exploring synergies with partner Fiat
(FIA.MI: Quote, Profile, Research, Stock Buzz), Group Chief Executive and Managing Director
Carl-Peter Forster told reporters. Tata currently has a joint
venture to sell Fiat-branded cars such as Linea, Grande Punto
and the Palio in India.

The firm is also looking to build a plant in India to
manufacture small trucks.

“In commercial vehicles, we are a dominant player in India.
Tata has all the ingredients to be and it is our ambition to be
a big player globally,” Foster said.

Fifty-five year old Forster, who joined Tata from General
Motors Europe earlier this year to bolster its international
ambitions, said new products from the company’s luxury brand
stable of Jaguar and Land Rover were being well received.

The company now plans to come up with a modern-day Defender
Land Rover model.

Earlier this week, Tata, India’s leading vehicle maker with
about two-thirds of the Indian market, swept past forecasts
with a fourth straight quarterly profit, driven by demand for
JLR. The results boosted its shares to their highest in at
least two decades. [ID:nSGE6790DG]

Tata’s results come amid a surge in demand for cars, trucks
and buses in India. Car sales in India hit a record high in
July, jumping 38 percent from a year earlier, boosted by the
launch of new models and the strong economy.
[ID:nTOE672059][ID:nSGE67999W] It makes utility vehicles
such as the Safari, Tata Magic and Winger and cars such as the
ultra-cheap Nano, Tata Indica and the premium sedan Indigo
Manza.
(Writing by Prashant Mehra; editing by Surojit Gupta and Jui
Chakravorty) ((janaki.krishnan@thomsonreuters.com, +91-22
66369138; Reuters Messaging:
janaki.krishnan.reuters.com@reuters.net)) ((if you have a query
or comment on this story, send an email to
news.feedback.asia@thomsonreuters.com))

The company’s Jaguar and Land Rover (JLR) unit, which Tata
bought from Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) in 2008, is expected to fuel
growth in coming quarters as demand for luxury brands increase,
particularly in emerging economies.

Rising numbers of wealthy, brand-conscious Chinese are
overtaking debt-burdened Europeans and Americans as the source
of sustained demand for Europe’s premium cars.

Tata Motors reported a consolidated net profit of 19.89
billion rupees ($429.59 million) for the quarter to June 30,
swinging back from a year-ago net loss of 3.29 billion rupees.
Revenues rose to 270.56 billion rupees from 164.73 billion
rupees.

A Reuters poll estimated net profit at 9.8 billion rupees
on net sales of 265.2 billion rupees.

During the quarter ended June, Tata Motors sold 181,708
vehicles, up 48 percent rise from a year earlier.

Tata’s results come amid a surge in demand for cars, trucks
and buses in India. Car sales in India hit a record high in
July, jumping 38 percent from a year earlier, boosted by the
launch of new models and the strong economy. [ID:nTOE672059]
[ID:nSGE67999W]

Tata Motors is the country’s leading maker of trucks and
buses with about two-thirds of the market. It also makes
utility vehicles such as the Safari, Tata Magic and Winger and
cars such as the ultra-cheap Nano, Tata Indica and the premium
sedan Indigo Manza.

“The numbers have far exceeded our expectations,” Surjit
Arora, an analyst at brokerage Prabhudas Lilladher, said.

“The momentum should continue as JLR is seeing strong sales
both in the UK and China,” he said.

Shares in Tata Motors, valued at $11 billion, closed up 4.2
percent at 957.30 rupees, outperforming the benchmark BSE index
.BSESN which fell 0.4 percent. It earlier hit 967.30 rupees
– their highest level in more than two decades, according to
Thomson Reuters data.

Tata shares have soared some 660 percent since their lows
of 126 rupees in February 2009 and have risen about 21 percent
so far this year, outpacing a 4 percent rise in the main index
and a rise of about 16 percent in the sector index .BSEAUTO.

The JLR unit sold 57,153 vehicles in the June quarter, up
from 35,947 a year earlier.

EXPANSION PLANS

Chairman Ratan Tata recently said in the company’s annual
report that it would add more Jaguar models, including an
entry-level car, a station wagon and a roadster.
[ID:nSGE672058]

The company has begun a search to replace Ratan Tata, who
is due to retire by the end of 2012.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For Starmine comparative data click:

r.reuters.com/weq24n

For newsmaker on Ratan Tata: [ID:nnSGE6730LJ]

For Tata Motors July vehicle sales: [ID:nnSGE67000W]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

On Tuesday, the company said it was in talks with potential
joint venture partners to start assembly-line operations for
the JLR brands in China. The company also plans to start
assembling Land Rover vehicles in India next year.

Other automakers are also taking advantage of the growing
demand for luxury vehicles in China. Sales of Daimler’s
(DAIGn.DE: Quote, Profile, Research, Stock Buzz) luxury brand Mercedes-Benz grew by just over 17
percent in July.

BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz), the world’s biggest maker of premium cars,
posted its best ever quarterly pretax profit earlier this
month. It said it had never sold as many Rolls-Royce models in
six months as it had this year, pointing to a sharp recovery
and broad-based demand for luxury cars. [ID:nLDE6711IW]

But recovery is still unsteady in the United States and
Europe where the industry is investing in technology to improve
fuel economy.

Volatile currencies could impact JLR profitability, Tata
Motors said on Tuesday.

Supply of engines from Ford, with which Tata Motors has an
agreement, was not keeping pace with demand for JLR products,
the Indian firm said.
($1=46.3 rupees)
(Writing by Pratish Narayanan; Editing by Jui Chakravorty and
Tomasz Janowski)

Three sources with knowledge of the matter told Reuters on Thursday that the company, which in 2008 lost out to Tata Motors (TAMO.BO: Quote, Profile, Research, Stock Buzz) for Ford Motor Co’s (F.N: Quote, Profile, Research, Stock Buzz) luxury brands Jaguar and Land Rover in 2008, is serious about making a competitive bid ahead of next Tuesday’s deadline.

“We have every intention of making a bid,” said a company source, who asked not to be identified because the offer was not yet public.

The company was willing to pay up to $400 million, or maybe more if needed, the sources said.

Mahindra, India’s largest utility vehicles maker, is among six bidders shortlisted to make a bid for cash-trapped Ssangyong, which has been under court-led restructuring since early 2009.

Other bidders include Renault-Nissan alliance (RENA.PA: Quote, Profile, Research, Stock Buzz) (7201.T: Quote, Profile, Research, Stock Buzz) and Kolkata-based Ruia group.

Renault-Nissan has said its interest in Ssangyong is purely for its plant capacity. Its south Korean car maker Renault-Samsung needs more capacity for Nissan-badged cars that it exports to Russia and the Middle East.

The other Indian bidder, Kolkata-based Ruia, has a track record of buying distressed assets such as Dunlop (DUNL.BO: Quote, Profile, Research, Stock Buzz) but its Chairman Pawan K. Ruia has said the group is yet to take a decision on whether to make a bid for Ssangyong.

Indian automakers, despite being part of a market that has grown 30 percent so far this year, are looking for a presence overseas, where car prices and margins are typically higher.

“It is inevitable that Indian auto makers should look at overseas acquisitions as this is the fastest way to get a global footprint compared to organic growth which will take a longer time,” said Abdul Majeed, leader for auto practice at PricewaterhouseCoopers.

Ssangyong shares ended up 3.9 percent in a slightly weaker Seoul market, while Mahindra shares fell 1.4 percent in a Mumbai market .BSESN down 0.2 percent.

BUILDING PRESENCE

Ssangyong, which has about 2 percent of the South Korean auto market, exports to Russia, Europe, China, Middle-East, Africa, North and South America and the Asia-Pacific.

Mahindra is scheduled to launch its Scorpio pick-up in the key U.S. market later this year and has also been investing in light and heavy trucks, two-wheelers and electric vehicles.

“This deal, if it goes through, will strengthen the company’s presence in the (utilities) segment globally,” said Umesh Karne, analyst with Brics Securities, adding that it would give it a global reach for its own products as well.

Analysts in South Korea said Ssangyong may help Mahindra develop technology and add line ups.

“Ssangyong’s technology, especially one on diesel engines, which can meet EURO 4 emission standards, will be attractive to Mahindra,” said Michael Sohn, an auto analyst at Woori Investment & Securities in Seoul.

After a dismal 2009, Ssangyong’s sales more than trebled in the first seven months of 2009 to 43,811 vehicles while in the first quarter its net loss reduced by more than 90 percent.

“I think anything over $400 million would be too expensive,” said an investment banker, not involved with the deal but who has worked with Mahindra in the past.

“What Mahindra will be getting are a couple of SUVs built on an outdated platform and a car, based on an older version of the Mercedes E-class,” he said.

Ssangyong sells the Rexton and Kyron SUVs and Chairman luxury sedan. Its current debt stands at $634 million.

In 2009/10, Mahindra sold 214,128 utility vehicles, up about 40 percent from a year earlier.

FUNDS

Mahindra, which has cash reserves of about 20 billion rupees, has a low debt to equity ratio of 0.4, which gives it the ability to raise funds, analysts said.

In July its chief financial officer had said the company had enough funds for its immediate needs. “If a situation arises where we need more, we will have no difficulty raising it,” Uday Phadke said.

“Ssangyong had a really bad year in 2009, but sales figures in the last few months have shown an improvement,” said Preet Mohan Singh, sector head at investment bank Avendus Capital.

“So I don’t expect too much in 2010 but in 2011, we can look at an operating profit of $200 million on a topline of $2 billion. The critical part is how Mahindra will integrate it,” he added.

Mahindra has capital expenditure plans of about 85 billion rupees over the next 3-5 years, with a part of the expenses to be shared by some of its subsidiaries.

(Additional reporting by Chang-Ran Kim in Tokyo & Jong-woo Cheon in Seoul; Editing by Lincoln Feast)

Three sources with knowledge of the matter told Reuters on Thursday that the company, which in 2008 lost out to Tata Motors for Ford Motor Co’s luxury brands Jaguar and Land Rover in 2008, is serious about making a competitive bid ahead of next Tuesday’s deadline.

“We have every intention of making a bid,” said a company source, who asked not to be identified because the offer was not yet public.

The company was willing to pay up to $400 million, or maybe more if needed, the sources said.

Mahindra, India’s largest utility vehicles maker, is among six bidders shortlisted to make a bid for cash-trapped Ssangyong, which has been under court-led restructuring since early 2009.

Other bidders include Renault-Nissan alliance and Kolkata-based Ruia group.

Renault-Nissan has said its interest in Ssangyong is purely for its plant capacity. Its south Korean car maker Renault-Samsung needs more capacity for Nissan-badged cars that it exports to Russia and the Middle East.

The other Indian bidder, Kolkata-based Ruia, has a track record of buying distressed assets such as Dunlop but its Chairman Pawan K. Ruia has said the group is yet to take a decision on whether to make a bid for Ssangyong.

Indian automakers, despite being part of a market that has grown 30 percent so far this year, are looking for a presence overseas, where car prices and margins are typically higher.

“It is inevitable that Indian auto makers should look at overseas acquisitions as this is the fastest way to get a global footprint compared to organic growth which will take a longer time,” said Abdul Majeed, leader for auto practice at PricewaterhouseCoopers.

Ssangyong shares ended up 3.9 percent in a slightly weaker Seoul market, while Mahindra shares fell 1.4 percent in a Mumbai market down 0.2 percent.

BUILDING PRESENCE

Ssangyong, which has about 2 percent of the South Korean auto market, exports to Russia, Europe, China, Middle-East, Africa, North and South America and the Asia-Pacific.

Mahindra is scheduled to launch its Scorpio pick-up in the key U.S. market later this year and has also been investing in light and heavy trucks, two-wheelers and electric vehicles.

“This deal, if it goes through, will strengthen the company’s presence in the (utilities) segment globally,” said Umesh Karne, analyst with Brics Securities, adding that it would give it a global reach for its own products as well.

Analysts in South Korea said Ssangyong may help Mahindra develop technology and add line ups.

“Ssangyong’s technology, especially one on diesel engines, which can meet EURO 4 emission standards, will be attractive to Mahindra,” said Michael Sohn, an auto analyst at Woori Investment & Securities in Seoul.

After a dismal 2009, Ssangyong’s sales more than trebled in the first seven months of 2009 to 43,811 vehicles while in the first quarter its net loss reduced by more than 90 percent.

“I think anything over $400 million would be too expensive,” said an investment banker, not involved with the deal but who has worked with Mahindra in the past.

“What Mahindra will be getting are a couple of SUVs built on an outdated platform and a car, based on an older version of the Mercedes E-class,” he said.

Ssangyong sells the Rexton and Kyron SUVs and Chairman luxury sedan. Its current debt stands at $634 million.

In 2009/10, Mahindra sold 214,128 utility vehicles, up about 40 percent from a year earlier.

FUNDS

Mahindra, which has cash reserves of about 20 billion rupees, has a low debt to equity ratio of 0.4, which gives it the ability to raise funds, analysts said.

In July its chief financial officer had said the company had enough funds for its immediate needs. “If a situation arises where we need more, we will have no difficulty raising it,” Uday Phadke said.

“Ssangyong had a really bad year in 2009, but sales figures in the last few months have shown an improvement,” said Preet Mohan Singh, sector head at investment bank Avendus Capital.

“So I don’t expect too much in 2010 but in 2011, we can look at an operating profit of $200 million on a topline of $2 billion. The critical part is how Mahindra will integrate it,” he added.

Mahindra has capital expenditure plans of about 85 billion rupees over the next 3-5 years, with a part of the expenses to be shared by some of its subsidiaries.

(Additional reporting by Chang-Ran Kim in Tokyo & Jong-woo Cheon in Seoul; Editing by Lincoln Feast)

Three sources with knowledge of the matter told Reuters on
Thursday that the company, which in 2008 lost out to Tata
Motors (TAMO.BO: Quote, Profile, Research, Stock Buzz) for Ford Motor Co’s (F.N: Quote, Profile, Research, Stock Buzz) luxury brands Jaguar
and Land Rover in 2008, is serious about making a competitive
bid ahead of next Tuesday’s deadline.

“We have every intention of making a bid,” said a company
source, who asked not to be identified because the offer was
not yet public.

The company was willing to pay up to $400 million, or maybe
more if needed, the sources said.

Mahindra, India’s largest utility vehicles maker, is among
six bidders shortlisted to make a bid for cash-trapped
Ssangyong, which has been under court-led restructuring since
early 2009.

Other bidders include Renault-Nissan alliance (RENA.PA: Quote, Profile, Research, Stock Buzz)
(7201.T: Quote, Profile, Research, Stock Buzz) and Kolkata-based Ruia group.

Renault-Nissan has said its interest in Ssangyong is purely
for its plant capacity. Its south Korean car maker
Renault-Samsung needs more capacity for Nissan-badged cars that
it exports to Russia and the Middle East.

The other Indian bidder, Kolkata-based Ruia, has a track
record of buying distressed assets such as Dunlop (DUNL.BO: Quote, Profile, Research, Stock Buzz) but
its Chairman Pawan K. Ruia has said the group is yet to take a
decision on whether to make a bid for Ssangyong. [ID:nWNAS9036]

Indian automakers, despite being part of a market that has
grown 30 percent so far this year, are looking for a presence
overseas, where car prices and margins are typically higher.

“It is inevitable that Indian auto makers should look at
overseas acquisitions as this is the fastest way to get a
global footprint compared to organic growth which will take a
longer time,” said Abdul Majeed, leader for auto practice at
PricewaterhouseCoopers.

Ssangyong shares ended up 3.9 percent in a slightly weaker
Seoul market, while Mahindra shares fell 1.4 percent in a
Mumbai market .BSESN down 0.2 percent.

BUILDING PRESENCE

Ssangyong, which has about 2 percent of the South Korean
auto market, exports to Russia, Europe, China, Middle-East,
Africa, North and South America and the Asia-Pacific.

Mahindra is scheduled to launch its Scorpio pick-up in the
key U.S. market later this year and has also been investing in
light and heavy trucks, two-wheelers and electric vehicles.

“This deal, if it goes through, will strengthen the
company’s presence in the (utilities) segment globally,” said
Umesh Karne, analyst with Brics Securities, adding that it
would give it a global reach for its own products as well.

Analysts in South Korea said Ssangyong may help Mahindra
develop technology and add line ups.

“Ssangyong’s technology, especially one on diesel engines,
which can meet EURO 4 emission standards, will be attractive to
Mahindra,” said Michael Sohn, an auto analyst at Woori
Investment & Securities in Seoul.

After a dismal 2009, Ssangyong’s sales more than trebled in
the first seven months of 2009 to 43,811 vehicles while in the
first quarter its net loss reduced by more than 90 percent.

“I think anything over $400 million would be too
expensive,” said an investment banker, not involved with the
deal but who has worked with Mahindra in the past.

“What Mahindra will be getting are a couple of SUVs built
on an outdated platform and a car, based on an older version of
the Mercedes E-class,” he said.

Ssangyong sells the Rexton and Kyron SUVs and Chairman
luxury sedan. Its current debt stands at $634 million.

In 2009/10, Mahindra sold 214,128 utility vehicles, up
about 40 percent from a year earlier.

FUNDS

Mahindra, which has cash reserves of about 20 billion
rupees, has a low debt to equity ratio of 0.4, which gives it
the ability to raise funds, analysts said.

In July its chief financial officer had said the company
had enough funds for its immediate needs. “If a situation
arises where we need more, we will have no difficulty raising
it,” Uday Phadke said.

“Ssangyong had a really bad year in 2009, but sales figures
in the last few months have shown an improvement,” said Preet
Mohan Singh, sector head at investment bank Avendus Capital.

“So I don’t expect too much in 2010 but in 2011, we can
look at an operating profit of $200 million on a topline of $2
billion. The critical part is how Mahindra will integrate it,”
he added.

Mahindra has capital expenditure plans of about 85 billion
rupees over the next 3-5 years, with a part of the expenses to
be shared by some of its subsidiaries.

(Additional reporting by Chang-Ran Kim in Tokyo & Jong-woo
Cheon in Seoul; Editing by Lincoln Feast)

Roughly half of the 550-odd staff at Volvo Buses India Pvt
Ltd’s factory near Bangalore started the “go-slow” process in
April, and went on strike a week ago.

The workers, who are in disagreement with management over
wages, are also demanding re-instatement of four workers who
were suspended in April as a disciplinary measure, the company
spokesman said.

“We have told them not to link the wage negotiations with
the suspension issue, which is under policy enquiry,” the
spokesman said, declining to be named. “They are two separate
issues and we want to go ahead with the wage agreement, which
is one of the best in the industry.”

The union could not be immediately reached for comment.

Volvo Buses, in which the Swedish parent holds 70 percent,
is a joint venture with Bangalore-based Azad Group. The factory
started operations in January 2008 and sells about 500-600
buses annually.

After the staff was suspended earlier this year, the
workers in the factory have been on a prolonged “go-slow”
agitation, the spokesman said. A “go-slow” process is one
wherein many employees work slower than usual while some refuse
to work at all.

LABOUR PROBLEMS ABOUND

Labour issues and strikes are not new to India. Earlier
this year, workers at Hyundai Motor’s (005380.KS: Quote, Profile, Research, Stock Buzz) India plant
went on a three-day strike over dismissal of some of its
employees. [ID:nSGE65902I]

Last year Honda Motorcycle & Scooters India, a unit of
Japan’s Honda Motor Corp (7267.T: Quote, Profile, Research, Stock Buzz), saw a “go-slow” by its
workers at its plant in the northern Indian state of Haryana,
over wage negotiations and other issues.

A wave of strikes by migrant workers in major Asian
economies such as China and India has raised questions over how
these countries will preserve their status as low-cost
manufacturing bases while avoiding growing discontent among
employees.

India’s labour laws are rated by the World Bank as among
the most rigid and some analysts say they hurt corporate
competitiveness in Asia’s third-largest economy.

While government data for strikes this year is not
available, there is evidence they are on the rise and more
unrest may be in store as India looks to divest stakes in
overstaffed state firms to bridge a yawning fiscal deficit.

A World Bank report on the ease of doing business ranked
India 122 of 181 countries last year, and suggested that
greater flexibility in labour laws would help create more jobs
and reduce poverty.
(Reporting by Janaki Krishnan; Editing by Ranjit Gangadharan
and Jui Chakravorty)