Mahindra & Mahindra Ltd, the Indian automaker that owns a 75 per cent stake in SsangYong Motor Co, has hinted at giving up control of the struggling South Korean automaker amid snowballing losses from Covid-19, industry sources said on Sunday.

Mahindra managing director Pawan Goenka reportedly told reporters last week: “SsangYong Motor needs a new investor. We are working with the company to see if we can secure investment.”

Goenka, who is also the chairman of SsangYong Motor’s board of directors, made the remarks during the automaker’s report on its first quarterly loss in 19 years.

Mahindra said it was mainly due to expanded losses from overseas entities, including SsangYong Motor and Mahindra GenZe, an electric bicycle company based in the US.

The Indian auto empire currently comprises 179 subsidiaries, 30 joint ventures and 28 associates.

Mahindra reported a net loss of 19.55 billion rupees ($260 million), compared with a net profit a year ago.

Mahindra deputy managing director Anish Shah was quoted as saying: “If a new investor comes on board, that automatically takes our stake down, or they may even buy our stake.”

He also reportedly said Mahindra will “exit loss-making international subsidiaries and entities over the next 12 months”, to focus more on its core auto and farm equipment businesses.

But SsangYong Motor argued that did not mean Mahindra was withdrawing immediately from the Korean entity.

“Mahindra is looking for a new investor, who may become the largest or the second-largest [shareholder of SsangYong Motor] – who knows? So it is still early to say that Mahindra is giving up on us,” a SsangYong Motor official told The Korea Herald.

Regarding the company’s apparent plans to exit underperforming overseas entities, he said the remarks had not come directly from Goenka and lacked credibility.

But in recent months, Mahindra has been minimising its direct assistance for the cash-strapped Korean automaker, which just marked its 13th consecutive quarter in the red.

In April, Mahindra rejected a call for fresh funding for SsangYong Motor in the amount of 500 billion won ($404 million) due to the economic downturn resulting from Covid-19. Instead, it injected 40 billion won last month.

Ever since Mahindra acquired SsangYong Motor in 2011, the Korean automaker barely managed to turn a profit until the launch of its compact sport utility vehicle the Tivoli in 2016. But the momentum did not last long.

Meanwhile, to secure liquidity, SsangYong Motor said it would apply for the government subsidy programme established to help companies struggling to cope with the Covid-19 pandemic.

Under the direction of the Ministry of Economy and Finance, the state-owned Korea Development Bank will roll out 40 trillion won worth of subsidies.

A SsangYong Motor official told The Korea Herald: “While detailed criteria for application are yet to be released, the company has been keeping a close eye to apply to receive the government funds.”

But, the ministry said, the situation of SsangYong Motor is unrelated to Covid-19, as its losses were reported prior to the outbreak.

A SsangYong Motor official rebutted the statement, saying: “Mahindra made it clear in April that it is not investing in SsangYong due to difficulties caused by Covid-19.”

He said the company’s sales and export volume had also deteriorated due to industry uncertainty amid the Covid-19 pandemic.

Since September, the company has been following a self-rescue plan, which has entailed cost-cutting measures such as salary cutbacks and reduced employee benefits.

Earlier this month, it sold an after-sales service centre located in Seoul’s Guro district, for 180 billion won to secure capital. The total amount will be deposited by the end of this month, said the company.

The Korean automaker estimated that a total of 500 billion won would be needed over the next three years to normalise its management.