South Korea's Ssangyong Motor is set to be taken over by Indian firm Mahindra & Mahindra as creditors of the troubled company announced on Friday that the utility vehicle specialist edged out competing bidders from France, Japan and India.

Ssangyong announced that it would sign a memorandum of understanding with Mahindra this month prior to the start of due diligence in September, revealing at the same time that the Indian carmaker would pay a five percent deposit equivalent of the total bidding price also this month.

The Korean carmaker said that Mahindra was chosen following careful study of its bid proposal, funding capabilities and willingness to further develop Ssangyong, which specialises on budget SUVs and sedans.

Mahindra's acquisition of Ssangyong would suit well on the company's current campaign of going global and should benefit from new technologies to be afforded by the Korean firm as it accelerates its thrust to gain more overseas markets.

Once the deal is finalised, Mahindra would follow Tata Motors as the second Indian automotive company to have gained access in the South Korean market when the latter purchased Daewoo Commercial Vehicle in 2004.

Industry analysts said that the deal could easily exceed the speculated price tag of 500 billion won though the bankrupt carmaker may have to push further to 740 billion in order to payback debts.

However, IBK Investment and Securities' Koh Tae-Bong told AFP that the bid price should not be more than 500 billion won as Ssangyong would potentially use up huge amount of funds to streamline its product line.

Mr Koh conceded that the Korean firm possesses impressive research and development capabilities "but it needs to reorganise its product focus from SUVs and big cars to more popular mid-sized sedans and smaller vehicles."

Ssangyong's woes started piling up following the skyrocketing movements of oil prices last year and a slow down in sales as the global financial crisis worsened.

The company further suffered when its former Chinese parent company Shanghai Automotive Industry Corp refused to provide more funds and eventually let go of the troubled firm, forcing the company to institute job cuts but subsequent workers' protests resulted to production delays.

However, Ssangyong gained some traction this year as sales of vehicles climb up to 43,881 in the first half as against the measly 13,091 units it managed to roll out last year.