In a large scale attempt to increase its commercial vehicle presence, Mahindra & Mahindra Ltd (M&M) has agreed to acquire 58.96% of the shares of SML Isuzu Ltd (SML) for ₹555 crore. The strategic investment is a new beginning for M&M as it plans to double its market share in the heavy commercial vehicle space and reinforce leadership in the Indian automotive sector.
A Strategic Step Towards Growth
The acquisition deal will see M&M buying SML shares at ₹650 each, aggregating to ₹555 crore. After the deal, M&M will also be making a mandatory open offer under SEBI Takeover Regulations to buy an addl 26% from public shareholders.
Presently, Mahindra & Mahindra enjoys a whopping 52% market share in the light commercial vehicle (LCV) space (less than 3.5 tonnes). Its market presence in the more than 3.5-tonne segment, however, is minimal, at just 3%. Through its acquisition of SML Isuzu, M&M hopes to increase its market share in this segment to 6%, with the goal of touching 10-12% by FY31 and more than 20% by FY36.
Unleashing New Possibilities with SML Isuzu
Established in 1983, SML Isuzu is a well-known brand in the trucks and buses category with a rich brand heritage and pan-India reach.Important points of SML Isuzu are:
- Leadership in the market in the Intermediate Light Commercial Vehicle (ILCV) category.
- Around 16% market share in the bus category.
- FY24 revenues of ₹2,196 crore and an EBITDA of ₹179 crore.
- Strong engineering capabilities and frugal manufacturing practices.
The acquisition opens doors to significant synergies for Mahindra in terms of cost optimization, brand strength, expanded distribution networks, manufacturing efficiencies, and product complementarities.
As part of the transaction:
- M&M will acquire 43.96% from Sumitomo Corporation.
- An additional 15% stake will be purchased from Isuzu Motors Ltd, a public shareholder of SML.
This acquisition aligns perfectly with Mahindra’s capital allocation strategy, focusing on high-growth potential sectors with operational excellence.
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Leadership Speaks on the Acquisition
Anish Shah, Group CEO & MD of Mahindra Group, expressed,
"The acquisition of SML Isuzu marks a significant milestone in Mahindra Group's vision of delivering five-fold growth in our emerging businesses. It aligns with our strategy to invest in high-potential areas where we have a strong right to win."
Rajesh Jejurikar, Executive Director and CEO of Auto and Farm Sector, Mahindra & Mahindra Ltd, added,
"SML brings a strong legacy, a loyal customer base, and a credible product portfolio that complements Mahindra’s offerings. Together, we are poised to become a full-range, formidable player in the commercial vehicles space."
What Lies Ahead?
Acquisition is pending for approvals from SEBI Takeover Regulations and the Competition Commission of India. This deal is on schedule to finish by 2025. Khaitan & Co and Kotak Investment Banking are advising the financial and legal sides of M&M in regard to this seminal deal.
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