Lotus’ expansion is being hampered by recent reports that the stake of the Malaysian government in Proton would be sold. Bloomberg said that due to speculation that control of Proton would be sold, its value increased by 50% in Kuala Lumpur trading this month. DRB-Hicom, from the local Malaysian car industry, is likely to get the majority holding.
According to investment experts, the new owner would probably have to divest itself of Proton’s 64% stake in Lotus Group International so that it could raise capital, which will be used to boost Proton’s market share in its domestic Malaysian market.
Proton’s profits dropped by 76% in the past quarter -- which is why it is being seen as a threat. Two Kuala Lumpur investment advisors, Gan Eng Peng of HwangDBS Investment and Alexander Chia of RHB Capital, told Bloomberg that a new Proton owner would find a Lotus sale to be sensible. But Lotus may not survive the sale if it means that a certain credit line would end.
Lotus CEO Dany Bahar is depending on this credit line to achieve its business plan for Lotus to be profitable by 2014. Bahar said that Lotus won’t survive without Proton’s support. Lotus would need an additional investment of £500 million to implement its expansion plan.
This sports car brand is valued at £200 million by Kuala Lumpur financial bodies but this is under the assumption that Bahar’s recovery plan is successful.