M&M Eyes Stronger Hold In Trucks And Buses With SML Isuzu Acquisition

Mahindra & Mahindra Ltd Monday said SML Isuzu Ltd. will continue as a separate listed company even though their operations will be integrated after the acquisition. At a press and analyst meet in Mumbai, M&M said the move would help it build a strong position in the medium-heavy commercial vehicle segment, particularly with SML Isuzu’s reach in the electric and compressed natural gas bus market.

"The one area where we’ll significantly gain is network," an official of the company said. "Both players are small today, so there's a big opportunity to synergise and scale up individually." M&M will also gain better access to fleet customers, particularly in the bus segment, thanks to the deal.

SML Isuzu mainly makes and sells light and medium commercial vehicles, with a portfolio of buses and trucks. On Saturday, M&M announced it would acquire a 59% stake in SML Isuzu from Sumitomo Corp. and Isuzu Motors Ltd. at ₹650 a share, costing roughly ₹5.6 billion overall.

M&M held a 5% market share in the trucks and buses segment in 2018-19 but lost ground after the COVID-19 pandemic and the shift to Bharat Stage-VI emission norms. It now aims to grow its share to between 10% and 12% over the next five years, mainly through light commercial vehicles and intermediate LCVs.

The move to take a majority stake in SML Isuzu is part of M&M’s push to grow in the over 3.5-tonne segment. Its current 3% share in this market will double to about 6% once the deal is closed. Looking ahead, M&M targets a share of over 20% in this space by 2035-36. The company said it has a positive view of the trucks and buses industry, supported by economic growth and rising replacement demand.

Calling the acquisition a “strong strategic fit” at a fair price, M&M stressed its ambitions are “rooted in reality”. "We’re clear about our strengths and where we can win. We know the medium and heavy commercial vehicle space is highly competitive, and we've been very realistic in setting our goals," the company said.

On employees, M&M said both companies have a growth mindset, so it does not expect much uncertainty among staff.
M&M also praised SML Isuzu's product range, highlighting the investments it has made over the past four years. It said no major fresh investment would be needed in the next two years, as SML Isuzu’s current factory capacity should be sufficient. Most future investments would be funded through SML Isuzu’s own internal cash flow. Exports could also open up new opportunities in selected markets, the company said.

“SML Isuzu does need some investments, but nothing dramatic. Most of it would be for ramping up capacity,” M&M said.
Importantly, SML Isuzu is in the advanced stages of developing electric buses, an area where M&M currently lacks presence. M&M believes it can strengthen SML Isuzu’s electric vehicle proposition by improving costs, using its own experience in electric powertrains across segments.

M&M said the acquisition could speed up SML Isuzu’s electric bus launches, with initial models aimed at staff and school transport, as well as executive coaches. M&M has no immediate plans to enter the inter-city and state transport bus market.

Together, M&M and SML Isuzu will have over 100 dealers and more than 200 touchpoints each, including service centres. M&M said it would focus on using their complementary dealer networks to improve after-sales service.