MG Motor India on Tuesday said it is impossible for any automobile company to be profitable in the very first year of its operations, in response to a notice from the Ministry of Corporate Affairs regarding why they have operational losses in the first year of operations 2019-2020.
In a statement the company said it has received a "notice seeking clarifications primarily on why we have operational losses basis our annual report for the first year of operations 2019-2020".
However, according to a report, the Ministry of Corporate Affairs has asked the company to explain irregularities and audit deficiencies of its financial records with its directors and auditor being summoned.
"We fully cooperate with the government authorities on all issues and are in process of providing the desired records and information to the Registrar of Companies within the stipulated time frame," MG Motor India said.
At the same time, it added, "we would also like to state that it is impossible for any automobile company to be profitable in the very first year of its operations."
This is because of the huge capex investment required and the long gestation period in a highly competitive market such as India where many multinationals have struggled for decades and have accumulated losses, the company said without disclosing the losses it posted in the first year of its operations.
In 2017, when the company completed the takeover of General Motors' Halol plant, MG Motor India had said it was investing over Rs 2,000 crore, including the acquisition of the manufacturing unit. It launched its first product, Hector SUV in 2019.
This year in August the company had announced that it planned to invest around Rs 4,000 crore on a second manufacturing unit.
"We are a global multinational, and our books are maintained as per Indian accounting standards and audited by reputed audit firms," it asserted.
MG Motor India also said it "is a law-abiding, professionally managed company that adheres to the highest standards of compliance and governance and is committed to transparency".