Mahindra & Mahindra (M&M) on Sunday announced that it has entered into an agreement to acquire a 58.96% stake in heavy vehicle maker SML Isuzu Ltd. (SML) at Rs 650 per share, which is an outlay of Rs 555 crore to bolster its truck and bus business. In addition, M&M will make an open offer under Sebi takeover regulations.
As part of the transaction, M&M will acquire the entire stake of 43.96% held by Sumitomo Corporation, promoter of SML, and separately also acquire 15% stake held by Isuzu Motors Ltd, public shareholder of SML, for an aggregate consideration of Rs 555 crore. M&M would also launch a mandatory open offer for acquisition of up to 26% stake from eligible public shareholders of SML in accordance with the Sebi takeover regulations.
The acquisition will double Mahindra's market share in the trucks and buses segment of India's fast-growing economy to 6%, with a plan to raise that to 12% by fiscal year 2031, it said.
"The proposed acquisition is a step towards establishing a strong presence in the >3.5T CV segment, where M&M has a 3% market share today, as compared to a 52% market share in the <3.5T LCV segment, the automajor said in a statement.
Dr. Anish Shah, Group CEO & MD of the Mahindra Group, said, “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.”
Rajesh Jejurikar, Executive Director and CEO, Auto and Farm Sector, Mahindra & Mahindra Ltd., said, “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 by enhancing market coverage, unlocking operating leverage through platform consolidation, a unified supplier and network base, and better plant utilization. Together, we are well-positioned to scale rapidly and drive profitable growth.”
The transaction, including the open offer, is subject to the approval of the Competition Commission of India and is expected to complete within 2025 in accordance with Sebi takeover regulations.
Kotak Investment Banking is acting as the financial advisor to M&M and manager to the open offer. Khaitan & Co acted as legal advisor to M&M.
SML Isuzu has a market-leading position in the ILCV buses segment, with around 16% market share. The company reported operating revenue of INR 2,196 crore and EBITDA of Rs 179 crore in FY24. It has profitable operations, frugal manufacturing, and strong engineering capabilities.
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