New Delhi: In a strategic move to strengthen its foothold in the I&LCV and bus segments, Mahindra & Mahindra (M&M) is set to acquire 58.96 per cent of SML Isuzu for ₹555 crore. This acquisition aims to unlock synergies across operations, strengthening M&M’s position in a segment where SML Isuzu already has a strong presence.The deal, which is expected to close within the next three months, will focus on optimising costs, sharing platforms, streamlining aggregates, enhancing supplier networks, and improving overall operations, the company’s management said on Monday.
Anish Shah, MD & CEO of the Mahindra Group mentioned that the automaker aims to expand the share of over 3.5 T commercial vehicles (CVs) in the Mahindra Trucks and Bus Division (MTBD) from a modest 3 per cent in FY25 to double it to 6 per cent, with a long-term target of reaching 10 to 12 per cent by FY31. The goal is to further increase this share to over 20 per cent by FY36.
“We are mindful that the M&HCV segment is very competitive, and we have been very realistic about the growth aspirations we have,” added Rajesh Jejurikar, ED and CEO – Auto and Farm Sectors, M&M.
Organisational structure
As part of the transaction, Mahindra will acquire Japan-based Sumitomo Corp’s 43.96 per cent stake in SML Isuzu, along with Isuzu Motors’ 15 per cent stake. Additionally, the company will launch a mandatory open offer to acquire up to 26 per cent more of the company’s shares, in compliance with local regulations.
Amarjyoti Barua, Mahindra Group CFO confirmed that there are no plans to form a new entity and SML Isuzu will remain a listed company after the acquisition. “The business will be run operationally as one. But entity rationalisation is not part of the game plan.”
Regarding employee retention, Mahindra said that while it “may need to adjust a few roles, there is no question of retrenchment”.
Punjab factory
SML Isuzu’s manufacturing plant in Punjab operates at 65 per cent to 70 per cent capacity utilisation. Jejuriker highlighted that the plant is “well-designed and runs frugally.” The investment, though not expected to be substantial, will be made as capacity ramps up and will be funded through the company’s internal cash accruals.
“One of SML Isuzu’s strengths is that many of its aggregates are manufactured in-house, which contributes to a more competitive cost structure,” he said.
Export is not a current priority for the company but will be considered in the future.
Focus on bus segment
With SML, Mahindra is targeting a strong presence in the school and staff bus segments. However, neither SML nor M&M is focused on state transport undertaking (STU) buses or large luxury inter-city buses, and don’t intend to enter those areas.
“Cracking the heavy commercial vehicles (HCV) industry takes time,” Vinod Sahay, President and CPO (Chief Purchase Officer) at APF and President for Aerospace & Defence, MTBD and CE noted.
According to him, the bus segment offers stability compared to the highly cyclical goods segment of the CV industry. While the cyclicity in trucks is directly tied to the gross body weight (GBW) of the vehicle, the bus market remains steady—it doesn’t grow significantly, nor does it experience sharp declines.
“This stability, coupled with SML’s strong market share in buses, helps de-risk the business model,” he said.
Platform sharing and sourcing
At the Bharat Mobility Global Expo this year, SML Isuzu launched the Hiroi.ev platform for commercial buses, which was scheduled to be rolled out in the April-June quarter this year.
Sahay shared that SML has a “strong” range of alternate fuel vehicles– CNG– and is at an advanced stage of preparations for its EV bus launch. “MTBD is absent in this area. We are working on its development.”
Jejuriker added that with Mahindra’s expertise on EVs in various other segments, it will look to improve costs. He further clarified that the company is not looking at any continued support from Isuzu. “All the IPs are owned by SML right now, and it has its own R&D and technological capability built into the company.”
Further, Mahindra is confident of adding value through its supplier relationships. For instance, some specialised CV suppliers cater exclusively to CV players which limited the company’s overall negotiation leverage. However, with SML’s involvement, the combined sourcing is expected to significantly increase, providing stronger negotiating power with these suppliers.
“We procure a lot of our sheet metal and other supplies for Swaraj locally in the Punjab ecosystem,” Jejuriker added.
Dealer network
One key area of focus is leveraging complementary networks for both brands, particularly in aftersales service. “Both the brands offer excellent products. However, one challenge we face in the market is that our network isn’t as extensive as that of the market leaders,” Sahay noted.
Together, the two companies have a network of over 100 dealers and approximately 200 touchpoints, including service centers.>
