Mahindra & Mahindra (M&M) has officially announced a strategic acquisition that aims to bolster its market presence in the truck and bus sectors while enhancing cost efficiencies within its tractor division. The company’s board recently approved the purchase of a 59% stake in SML Isuzu, a leading commercial vehicle manufacturer in India, for ₹555 crore. This move marks a significant step for M&M, positioning them for growth in a competitive landscape.

SML Isuzu: An Overview

Located in Punjab, SML Isuzu holds the title of the seventh-largest commercial vehicle manufacturer in India. Following the acquisition announcement, its stock took a hit, dropping by 10% on the BSE, reaching the lower circuit limit. Conversely, M&M’s shares experienced a positive uptick, climbing by 2.29%, closing at ₹2,942.6 per share.

• SML Isuzu’s market share in the light bus segment is approximately 16%.
• With M&M’s existing portfolio, the combined share would rise to 21%.

Strategic Growth Plans

Rajesh Jejurikar, M&M’s Executive Director, highlighted the company’s ambition to increase its overall trucks and buses market share from 3% to 10-12% by FY31. The focus will be on expanding their presence in the light commercial vehicle (LCV) and intermediate light commercial vehicle (ILCV) segments.

Medium and Heavy Commercial Vehicles

SML Isuzu also plays a role in the medium and heavy commercial vehicle (MHCV) market, where its share is currently at 2%. Jejurikar emphasized the goal of elevating this share to 5% within the next five years, particularly in the bus segment where M&M has previously been absent.

Electric Vehicle Transition

A major area of interest for M&M will be SML Isuzu’s initiative towards electric vehicles (EVs). At the recent Auto Expo, SML showcased a concept electric bus designed for school and corporate transport. M&M plans to leverage its expertise in EV technology to support SML’s growth in this sector, as Jejurikar noted, “SML is at an advanced stage of building e-buses, and our EV expertise will enhance that proposition.”

• Current capacity utilization at SML Isuzu is between 65-70%, with no significant investments anticipated in the next two years.

Collaborative Opportunities

Beyond EV technology, M&M aims to integrate its internal combustion engine solutions into SML’s product line. This collaboration opens up numerous opportunities for cost optimization, platform synergies, and supplier network enhancements.

Future Steps: Open Offer

In addition to the acquisition, M&M has initiated an open offer to purchase an additional 26% stake in SML Isuzu, priced at ₹1,596.10 per share, totaling ₹584 crore if fully accepted by shareholders.

SML Isuzu will continue to operate as an independent entity, ensuring that it maintains its identity in the marketplace while benefiting from M&M’s extensive resources and expertise in the automotive sector. As M&M embarks on this exciting journey, both companies stand to gain from the synergies created by this strategic partnership.