Mahindra & Mahindra (M&M) plans to acquire a 58.96% stake in SML Isuzu

Major Stake Purchase

Mahindra and Mahindra (M&M) is going to acquire 58.96% shares of SML Isuzu at ₹555 crore, as per which the company is going to buy a total of 43.96% of SML Isuzu from Sumitomo Corporation and 15% from Isuzu Motors at ₹650 per share. After that, an open offer to acquire an additional 26% stake will be made, subject to the approval of the Competition Commission of India. The expected completion for this transaction would be by 2025, which follows the SEBI Takeover Regulations.

Boosting Market Penetration

Currently, SML Isuzu shares hold only 16% of the intermediate light commercial vehicle bus segment. Z3 Analyst estimates that SML will generate revenues of ₹2,196 crore and ₹179 crore in EBITDA for FY24. M&M, at present, holds a paltry 3% market share in the over 3.5 tons segment. It plans doubling this to 6% in the short term; in the long term, to reach the level of 10-12% by FY31 and more than 20% by FY36. Thus, this incorporation will give a competitive edge to M&M as compared to its other rivals like Tata Motors.

Also Read about India Plans Safety Standards for Trucks and Heavy Vehicles

Strategic and Operational Synergies

Acquisition truly captures cost, network, and product development synergies with M&M. SML’s engineering capability and frugal manufacturing complement Mahindra and Mahindra’s strength in technology and design. Rajesh Jejurikar, M&M’s Auto and Farm Sector CEO, emphasized SML customer loyalty and complementary offerings. This move is in line with the vision of M&M’s annual fivefold scaling of the emerging businesses, as mentioned by the Group CEO, Anish Shah. This is a deal that would put M&M ahead for rapid growth in the commercial vehicle market.

Industry Impact

M&M’s foray into the heavier range is into the business of doughty leaders like Ashok Leyland. SML’s strong standing in trucks and buses completes M&M’s bouquet. The acquisition has all the hallmarks of a calculated strategy with backing from Kotak Investment Banking and Khaitan & Co. Posts on X reveal market exuberance as they expect M&M’s stock to fetch considerable attention. This deal is expected to change the complexion of the Indian commercial vehicles market toward innovation and competition.

Future Outlook

Thus, regulatory approvals have to be secured before closure, which is targeted for 2025. M&M’s open offer will comply with SEBI norms, giving public shareholders an opportunity to participate. The acquisition is partially in line with M&M’s capital allocation strategy to invest in high-growth sectors. Growth will be made profitable by leveraging SML’s strengths, and thus, M&M would be a step closer to achieving a dominating status in India’s commercial vehicles.

Source: India Today

The information provided in this article is sourced from the internet and may change; we strongly recommend verifying all details, including prices and specifications, with your nearest CAR Motors Dealer or customer care before making any decisions.

For more automobile news, Follow AutomobilIndia and stay updated!!