Homegrown automaker Mahindra & Mahindra (M&M) will acquire a 58.96% stake in SML Isuzu for `555 crore at `650 per share — a 63% discount to the latter’s closing price of `1,789 on Friday.
The deal values SML Isuzu, which had a market capitalisation of Rs 2,557 crore at the end of last week, at a significant discount.
As part of the transaction, M&M would 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. M&M would launch a mandatory open offer for the acquisition of up to 26% stake from eligible public shareholders of SML in accordance with the SEBI Takeover Regulations.
The proposed acquisition, as per M&M, is a step towards establishing a strong presence in the 3.5 tonnes and plus commercial vehicle (CV) segment, where it has a 3% market share, as against a 52% market share in 3.5 tonnes light CV segment. M&M feels the acquisition will double market share to 6%, with a plan to increase this to 10 - 12% by FY31 and over 20 by FY36. Incorporated in 1983, SML Isuzu is a listed company with a strong vintage and pan-India presence in the trucks and buses segment. SML has a market-leading position in ILCV Buses segment, with 16% market share.
It reported operating revenue of `2,196 crore and EBITDA of `179 crore in FY24. It has profitable operations, frugal manufacturing, and strong engineering capabilities.
Anish Shah, Group CEO & MD of Mahindra Group, said the acquisition of SML Isuzu marks a major milestone in the Group’s vision of delivering 5x growth in emerging businesses. “This acquisition is aligned with our capital allocation strategy for investing in high potential growth areas which have a right to win and have demonstrated operational excellence,” he stated.
Rajesh Jejurikar, executive director and CEO of auto and farm Sector at M&M, said, “This 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 utilisation. 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 be completed 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.