M&M To Acquire Majority Stake In SML Isuzu, Shift Gears In Trucks, Buses Segment; Open Offer On Cards

M&M acquires SML Isuzu: In a bid to strengthen its position in the trucks and buses segment, Mahindra & Mahindra (M&M) on Saturday announced the acquisition of 58.96% stake in SML Isuzu (SML) at Rs 650 per share. M&M's acquisition of SML Isuzu's stake includes the purchase of 43.96% of its equity share capital from promoter Sumitomo Corporation, and 15 % of its equity share capital from public share holder, Isuzu Motors Limited (Isuzu).

M&M is also considering making an open offer in alignment with the Securities Exchange Board of India (SEBI) takeover regulations. The proposed acquisition would enable M&M to boost its presence in the >3.5T CV segment (referring to Medium and Heavy Commercial Vehicles like trucks and buses), where M&M currently has a 3% market share.

M&M's SML Isuzu Acquisition Details

"Mahindra & Mahindra Ltd ("M&M") today announced that it has entered into an agreement to acquire 58.96% stake in SML Isuzu Ltd. ("SML") at INR 650 per share, which is an outlay of INR 555 crore. In addition, M&M will make an open offer in accordance with SEBI Takeover Regulations," read a press release by M&M on Saturday, April 26.

The automaker will acquire the entire stake of 43.96% held by Sumitomo Corporation. In addition to this it will also acquire 15% stake owned by Isuzu Motors Limited for an aggregate consideration of Rs 555 crore.

M&M SML Acquisition: Open Offer

M&M is also planning to launch a mandatory open offer for acquisition of up to 26% stake from eligible public shareholders of SML. The open offer has been planned in accordance with the mandatory condition set by the market watchdog to protect the interests of minority stakeholders during acquisitions.

"The acquisition of SML Isuzu marks a significant milestone in Mahindra Group's vision of delivering 5x growth in our emerging businesses. 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," said Anish Shah, Group CEO & MD of the Mahindra Group.

The company plans to finish the open offer, alongwith the total transaction, by 2025, subject to approval from the Competition Commission of India.

M&M's SML Acquisition: How Will It Help M&M Become A Full-Range, Formidable Player in Commercial Vehicles?

Mahindra & Mahindra has a strong 52% market presence in the light commercial vehicles segment. SML's acquisition is likely to boost its progress in the trucks and buses division made over the past few years. M&M believes that the acquisition would double its market share to 6% paving the way for further expansion to 10-12% by FY31.

"This acquisition is a pivotal step toward our ambition to become a full-range, formidable player in commercial vehicles by enhancing market coverage, unlocking operating leverage through platform consolidation, a unified supplier and network base, and better plant utilization," noted Jejurikar, Executive Director and CEO, Auto and Farm Sector, Mahindra & Mahindra Ltd.

M&M shares closed 1.33% lower at Rs 2862.20 per share on BSE on Friday with a market capitalisation of Rs 3,55,922.82 crore.

About SML Isuzu

Previously known as Swaraj Mazda, SML Isuzu Limited was formed in July 1982 for the production of light commercial vehicles (LCV) in Punjab, India. In 2009, Sumitomo increased its stake in the company to 52.5% by purchasing the entire equity holding of Punjab Tractors. In March, the company sold a total of 594 units of cargo vehicles and 1721 units of passenger vehicles.