Hyundai Motors India's Nasty 2017 contract no one told you about!

If you’re one of Hyundai Motors India’s 13 lakh shareholders, this is for you.

If you’re one of Hyundai Motors India’s 13 lakh shareholders, this is for you.

In 2017, HMI awarded a massive construction project to another company wholly owned by the South Korean parent group.

However, this Chennai-registered company (HEC India LLP) had just 10 or so employees and was now supposed do massive construction in Gurgaon.

• So, it made a margin and subcontracted that project to another company registered nearby in Chennai

• This one was called Kotec Automotive Services Pvt Ltd (KAS), also founded, owned and run by South Korean individuals who had been working with Korea-based Hyundai Group since 1980s

But, guess what?

KAS also made a margin and subcontracted the project to another construction company, registered close by in Chennai.

This one was called You Seung Sang Sa India Construction Pvt Ltd (YSSS), and ironically, it was also founded, owned and run by South Korean individuals.

But then, YSSS also made a cut and subcontracted the project to another UP-based local construction firm called RT Construction which completed the job.

And this is where it gets even more interesting.

• You see, the now-listed Hyundai Motors India paid HEC India LLP

• And HEC India LLP paid KAS. And KAS paid YSSS

But YSSS defaulted on its payments to RT Construction, causing crores of losses and driving the company to file a case!

But, what’s more important here?

Now, as a listed entity, Hyundai Motors India has sought the minority shareholder approval to award another Rs 3k crore construction contract to HEC India LLP, which continues to have just 10 employees.

Thus, it’s a given that it will again keep a margin for the parent and then forward the contract to another builder.

And this does not end there.

..

Beyond that Rs 3k crore contract, Hyundai Motors India has also sought approvals for another Rs 28k crore of business with companies owned by the Korean parent.

This raises alarm bells if the Korean parent is trying to milk the Indian-listed entity by driving its contracts through its own units, all at the expense of public shareholders.

Rest, goes without saying, that this is my individual analysis, and is no investment or trading advisory/recommendation.

But, what do you think? And did you know this?

Best,
Jayant Mundhra

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