Analysts believe that Mahindra & Mahindra (M&M)’s decision to buy a major stake in SML Isuzu could be a profitable deal for it. He says that this deal will give M&M its This will help in strengthening the commercial vehicle (CV) portfolio (primarily trucks and buses) and increasing market reach.
ICICI Securities said, ‘We view this transaction as positive for M&M. This will help it overcome the shortcomings in its vehicle portfolio through synergy in cost, network, manufacturing, platform and supply sourcing.
SML Isuzu is engaged in manufacturing and sales of Light Commercial Vehicles (LCV) and Medium/Heavy Commercial Vehicles (MHCV) and its vehicle portfolio includes buses, trucks and special purpose vehicles. The company is the market leader in the Intermediate Light Commercial Vehicle (ILCV) bus segment with 16 per cent market share. M&M’s shares have gained 1.4 per cent since the deal was announced on April 26.
M&M will acquire 58.96 per cent equity in SML Isuzu by December 2025. In this, M&M will buy 43.96 percent stake from Sumitomo Corporation and 15 percent from Isuzu Motors Limited for Rs 555 crore. There will also be an open offer to acquire additional 26 per cent equity for Rs 585 crore. The deal values listed company SML Isuzu at 8x PE on trailing twelve month (TTM) basis.
Nuvama Institutional Equities believes that the acquisition of this 85 per cent stake (59+26 per cent) for Rs 1,140 crore will be marginally EPS accretive for M&M. The brokerage has maintained ‘buy’ rating on M&M shares with a price target of Rs 3,700. Nuwama said that
The acquisition will increase M&M’s market share in the 3.5 tonne CV segment to 6 per cent from the current 3 per cent. As Mahindra Truck and Bus Division (MTBD), M&M is present in the MHCV segment.
The management wants to increase this market share to 10-12 percent by FY 2031 and to 20 percent by FY 2036. The combined entity’s share in the LCV bus segment is expected to increase to 21 per cent from the current 16 per cent for SML Isuzu. Nomura has ‘buy’ rating on M&M with a price target of Rs 3,681. Emkay Global has maintained ‘Add’ rating with an unchanged price target of Rs 2,700 for the stock.
First Published – May 1, 2025 | 10:43 PM IST
