South Korea’s leading construction equipment maker Doosan Infracore Co. lost a legal battle over the sale of Doosan Infracore China Co. (DICC) to a group of local financial investors in the second trial, which is expected to cost the company as much as 709 billion won ($655 million) in compensation if defeated in the final ruling.

According to legal sources on Wednesday, the Seoul High Court partially sided with local private equity funds including Mirae Asset PE and IMM PE by ordering Doosan Infracore to pay 10 billion won, part of 14.5 billion won that the PEFs had demanded.

The local PEFs took loans to acquire a 20 percent stake in DICC for 380 billion won in 2011 with a plan to repay the debts through an initial public offering (IPO) of the Chinese unit or sale of their stakes to a third party.

But the IPO was canceled due to the poor earnings of DICC, souring sales prospects as well. The PEFs filed a lawsuit against DICC’s largest shareholder Doosan Infracore in November 2015, claiming damages in principal and a 15 percent interest over their investment by placing the parent company accountable for the sale flop.

Emboldened by the second ruling, the PEFs are expected to significantly up indemnity charge to 709 billion won including 380 billion won in principal and a 15 percent interest, considering that the plaintiff usually keeps the compensation claim to a minimum at the early stages of the suit to lower the litigation costs.

If the ruling is upheld by the top court, Doosan Infracore would have to pay more than its operating profit of 660.8 billion won earned last year. The company projected that it would record 713 billion won in operating profit this year, but the possible defeat is expected to put a serious dent on its bottom line. It said it plans to appeal at the Supreme Court.

Shares of Doosan Infracore closed Thursday down 4.37 percent at 9,850 won.

By Han Woo-ram and Choi Mira

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