Hyundai Department Store Group to shed rental unit to become leaner

[Provided by Hyundai Department Store Group]

Hyundai Department Store Group (HDSG) has become first among big Korean conglomerates to streamline business to ready ammunitions against an economic downturn.

According to multiple sources from the retail and investment bank industries on Wednesday, the retail group plans to shed Hyundai Rental Care, a rental and care services unit, to become leaner amid forecasts of the economy turning weakest since pandemic and financial crisis period.

HDSG is in discussion to sell Hyundai Home Shopping’s controlling stake in Hyundai Rental Car to M Capital, formerly Hyosung Capital, for 200 billion won ($150 million).

HDSG launched Hyundai Rental Care in 2015 with hopes to advance into home rental business market. The latecomer in renting out water and air purifiers and bidets and mattresses, refrigerators, and steam closets however has been struggling to beat competition.

There were early hopes that the rental business will be able to create synergy with other HDSG businesses like home shopping and department store. Hyundai Rental Care’s cumulative operating loss reached 122.5 billion won last year.

The rental unit has managed to swing to a profit this year but the gap with big players is still wide.

The number of rental accounts with Hyundai Rental Care hit 400,000 in 2021, far behind Coway with 6.5 million, SK magic with 2.2 million, and Chungho Nais with 1.7 million.

“We are mulling various measures to boost competitiveness of the related business,” said an unnamed official from HDSG.

HDSG believes it can maintain synergy between other businesses like home shopping and department store and rental business by retaining some shares.

M Capital mulling purchase of Hyundai Rental Care behind Hyundai Quming rental brand plans to either establish a private equity fund (PEF) or become a key Limited Partner (LP) of a PEF.

M Capital owns new technology venture capital business license and can engage in general partner role for fund creation.

The largest shareholder of M Capital is Smart Leadings Holdings, a special purpose company set up by PEF management firm STLeaders Private Equity. STLeaders PE in 2020 formed a consortium with MG Community Credit Cooperatives and successfully acquired 350 billion won Hyosung Capital. MG Community Credit Cooperatives at the time played the role of an LP by investing 150 billion won or 60 percent of entire acquisition amount.

MG Community Credit Cooperatives may join as an investor in a fund acquiring Hyundai Rental Care as it has interest in rental businesses.

M Capital is hoping to create synergy with its retail finance unit which will help lower dependence on facility finance that involves machine tools and special equipment. Retail finance accounts for only 15 percent of its entire portfolio.

Capital firms have been expanding new projects related to rental business amid growth in subscription economy. They hope to apply features of subscription economy to rental business.