M&M to Acquire 58.96% Stake in SML Isuzu for ₹555 Crore
In a significant development in the Indian automotive industry, Mahindra & Mahindra (M&M) has announced that it has signed an agreement to acquire a 58.96% stake in SML Isuzu, a leading heavy vehicle manufacturer, for ₹555 crore. This strategic acquisition aims to strengthen M&M’s bus and truck business, a crucial segment in the commercial vehicles market.
The acquisition is expected to have a significant impact on M&M’s market share in the commercial vehicles segment. The company plans to increase its market share to between 10% and 12% by FY2031 and to 20% by FY2036. This will be achieved by leveraging SML Isuzu’s expertise and manufacturing capabilities to expand M&M’s product portfolio and geographic presence.
Under the agreement, M&M will make an open offer to acquire up to 25% additional equity shares in SML Isuzu from public shareholders. The open offer price has been fixed at ₹1,300 per share, which is at a premium of 12.5% to the current market price of SML Isuzu shares. The acquisition is expected to be completed by the end of March 2023, subject to regulatory approvals.
SML Isuzu is a well-established player in the heavy vehicle market, with a strong presence in the bus and truck segments. The company has a diverse product portfolio, including buses, trucks, and special applications vehicles. Its manufacturing facilities are located in Punjab and Gujarat, and it has a strong distribution network across the country.
The acquisition of SML Isuzu will complement M&M’s existing commercial vehicle business, which is one of the largest in India. M&M’s commercial vehicle portfolio includes a range of buses, trucks, and vans, and it has a strong presence in both the domestic and international markets.
The strategic acquisition will also provide M&M with access to SML Isuzu’s expertise in the heavy vehicle segment, including its manufacturing capabilities and technology. This will enable M&M to expand its product portfolio and enter new markets, including the high-growth segments of electric and autonomous vehicles.
The acquisition is expected to be accretive to M&M’s earnings from the first year itself, and it will also provide opportunities for synergy and cost savings. The company plans to integrate SML Isuzu’s operations with its own, and to leverage its manufacturing capabilities to reduce costs and improve efficiency.
The news of the acquisition has been welcomed by the market, with M&M’s shares rising by over 2% on the day of the announcement. The acquisition is also expected to have a positive impact on SML Isuzu’s shares, which have been trading weakly in recent months.
In conclusion, the acquisition of SML Isuzu by M&M is a significant development in the Indian automotive industry. The acquisition will strengthen M&M’s bus and truck business, and provide opportunities for growth and expansion in the commercial vehicles market. It will also provide M&M with access to SML Isuzu’s expertise and manufacturing capabilities, and enable it to expand its product portfolio and enter new markets.
