Mahindra & Mahindra Acquires Majority Stake in SML Isuzu Ltd
Mahindra & Mahindra Ltd (M&M) has initiated a significant transaction, revealing plans to acquire a 58.96% stake in SML Isuzu Ltd for ₹650 per share, totaling an investment of ₹555 crore. The deal includes a mandatory open offer, enabling eligible public shareholders of SML to sell up to 26% of their shares, in accordance with SEBI Takeover Regulations.
Transaction Details
As part of this acquisition, M&M will purchase the entirety of the 43.96% stake held by Sumitomo Corporation, a promoter of SML. Additionally, M&M plans to acquire the 15% stake owned by Isuzu Motors Ltd, further solidifying its position within the commercial vehicle sector.
Market Potential and Strategic Goals
The acquisition represents a strategic move for M&M to strengthen its foothold in the over 3.5-ton Commercial Vehicle (CV) segment, where it currently holds a modest 3% market share, in stark contrast to its impressive 52% share in other segments. M&M aims to increase its market share to 6% post-acquisition, with long-term targets set at 10-12% by FY31 and surpassing 20% by FY36.
SML’s Industry Standing
SML Isuzu Ltd boasts a leadership role in the Intermediate and Light Commercial Vehicle (ILCV) Bus segment, commanding approximately 16% of the market. In fiscal year 2024, SML reported operating revenues of ₹2,196 crore and an EBITDA of ₹179 crore, reflecting its strong operational performance and robust engineering capabilities. The company’s efficient manufacturing processes provide excellent avenues for synergies, including cost savings, enhanced branding, and improved product offerings.
Leadership Perspectives
“The acquisition of SML Isuzu marks a significant milestone in Mahindra Group’s vision of delivering 5x growth in our emerging businesses,” said Dr. Anish Shah, Group CEO & MD of the Mahindra Group. “This acquisition is aligned with our capital allocation strategy for investing in high potential growth areas which have a strong right to win and have demonstrated operational excellence.”
Rajesh Jejurikar, Executive Director and CEO of the Auto and Farm Sector at Mahindra & Mahindra Ltd., commented, “SML brings a strong legacy, a loyal customer base, and a credible product portfolio that complements Mahindra’s existing offerings in the trucks and buses segment. This acquisition is a pivotal step toward our ambition to become a full-range, formidable player in commercial vehicles.”
Regulatory Considerations and Future Outlook
The completion of this transaction, including the open offer, is contingent upon approval from the Competition Commission of India. The process is expected to be concluded by 2025, adhering to the SEBI Takeover Regulations. Kotak Investment Banking serves as the financial advisor to M&M while Khaitan & Co provides legal guidance on the deal.
