M&M to acquire 58.96% stake in SML Isuzu for ₹555 crore
Mahindra & Mahindra (M&M), one of India’s largest automotive companies, has made a significant move to strengthen its bus and truck business by acquiring a 58.96% stake in SML Isuzu Limited for ₹555 crore. The acquisition aims to boost M&M’s presence in the commercial vehicles sector and increase its market share in the coming years.
According to a recent agreement signed between M&M and SML Isuzu, the former will acquire a majority stake in the latter through an open offer. The deal is expected to be completed by the end of this calendar year. The acquisition price of ₹555 crore works out to around ₹215 per share, which is at a premium of 20% to SML Isuzu’s current market price.
The acquisition is seen as a strategic move by M&M to expand its presence in the commercial vehicles sector, which is a key growth area for the company. The Indian commercial vehicles market has been growing steadily in recent years, driven by increasing demand from the logistics and e-commerce sectors.
M&M has set ambitious targets for its commercial vehicles business, aiming to increase its market share between 10% and 12% by FY2031 and to 20% by FY2036. The acquisition of SML Isuzu is expected to play a crucial role in achieving these targets.
SML Isuzu is a leading player in the heavy vehicle segment, with a strong brand presence in the market. The company has a diverse product portfolio that includes buses, trucks, and special application vehicles. SML Isuzu has a strong distribution network and a well-established dealership network across the country.
The acquisition is also expected to bring synergies and cost savings for M&M, as the company can leverage SML Isuzu’s manufacturing capabilities and distribution network to increase its sales and market share. M&M has already started exploring opportunities to integrate SML Isuzu’s operations with its own, with a focus on improving efficiency and reducing costs.
The acquisition is also seen as a strategic move by M&M to counter the growing presence of foreign players in the Indian commercial vehicles market. The company has been facing intense competition from foreign players such as Volvo and Daimler, which have been aggressively expanding their presence in the Indian market.
However, the acquisition is not without its challenges. SML Isuzu has been facing financial challenges in recent years, with the company reporting a net loss of ₹61.5 crore in the quarter ended September 2022. The company’s revenue has also been declining over the past few years, due to intense competition and a slowdown in demand.
Despite these challenges, M&M is confident that its acquisition of SML Isuzu will be successful, given the company’s strong brand presence and manufacturing capabilities. M&M has also promised to support SML Isuzu in its turnaround efforts, with a focus on improving the company’s financial performance and increasing its market share.
The acquisition is expected to have a positive impact on M&M’s share price, which has been trading at a premium to its historical average. The company’s market capitalization is expected to increase significantly following the acquisition, given the strong growth potential of the commercial vehicles sector.
In conclusion, M&M’s acquisition of SML Isuzu is a strategic move that is expected to strengthen its bus and truck business and increase its market share in the commercial vehicles sector. The acquisition is expected to bring synergies and cost savings for M&M, and is seen as a positive development for the company’s shareholders.
Source:
