Mahindra to acquire 58.96% stake in SML Isuzu for Rs 555 crore
Mahindra & Mahindra Ltd (M&M) has entered into an agreement to acquire a 58.96 per cent stake in SML Isuzu Ltd. (SML) at Rs 650 per share, involving an outlay of Rs 555 crore, according to a statement by the automobile major.
- This deal will significantly boost M&M’s portfolio in the commercial vehicles (CV) space.
- The agreement also mandates an open offer under the SEBI Takeover Regulations, expanding M&M’s ownership potential.
Strengthening Presence in 3.5T Segment
The acquisition is a strategic move to strengthen M&M’s presence in the 3.5-tonne commercial vehicle (CV) segment, where it currently holds only a 3 per cent market share.
- Comparatively, M&M already enjoys a 52 per cent market share in the 3.5-tonne light commercial vehicle (LCV) segment, highlighting growth potential.
A Strategic Milestone for Growth
Dr. Anish Shah, Group CEO & MD of the Mahindra Group, emphasized that the acquisition marks a significant milestone in achieving Mahindra’s vision of 5x growth in emerging businesses.
- He mentioned that the move is aligned with Mahindra’s capital allocation strategy, targeting high-growth areas with strong potential and operational excellence.
Boosting Market Share Ambitions
M&M’s Trucks and Buses Division has seen meaningful progress in recent years, setting a strong foundation for this acquisition.
- With SML’s integration, M&M’s market share will double to 6 per cent, aiming to grow further to 10–12 per cent by FY31 and exceed 20 per cent by FY36.
SML Isuzu: A Proven Performer
Incorporated in 1983, SML Isuzu is a listed company known for its strong brands, vintage, and nationwide presence in the Trucks and Buses segment.
- SML holds a market-leading position in the Intermediate Light Commercial Vehicle (ILCV) Buses category, with about 16 per cent market share.
Financial Performance and Strengths
For FY24, SML reported an operating revenue of Rs 2,196 crore and EBITDA of Rs 179 crore, showcasing its financial robustness.
- The company is recognized for its profitable operations, cost-efficient manufacturing, and strong engineering capabilities, making it a valuable acquisition.
Transaction Structure
As part of the transaction, M&M will acquire the entire 43.96 per cent stake held by Sumitomo Corporation and an additional 15 per cent stake held by Isuzu Motors Ltd.
- This totals an acquisition cost of Rs 555 crore and represents a comprehensive buyout strategy.
Furthermore, M&M will launch a mandatory open offer for up to 26 per cent stake from eligible public shareholders, complying with SEBI Takeover Regulations.
- This would further consolidate Mahindra’s control over SML.
Strategic Rationale for the Acquisition
Rajesh Jejurikar, Executive Director and CEO of Auto and Farm Sector at M&M, highlighted the acquisition as a pivotal step in becoming a full-range, formidable player in the commercial vehicle space.
- It enables platform consolidation, supplier unification, network expansion, and better plant utilization, thus boosting scalability and profitability.
Regulatory Approvals and Completion Timeline
The entire transaction, including the open offer, is subject to the approval of the Competition Commission of India and is expected to complete within 2025.
- It will adhere to the stipulations under SEBI Takeover Regulations.
Advisors to the Deal
Kotak Investment Banking is acting as the financial advisor and manager to the open offer for M&M.
- Meanwhile, Khaitan & Co served as the legal advisor, ensuring regulatory and legal compliance throughout the transaction.
