Stake in SML Isuzu, M&M eyes e-bus foray soon, 21% share in LCV bus segment

Business Standard

28-04-2025

M&M has entered into an agreement to acquire 58.96% in SML Isuzu for Rs 555 crore
Sohini Das Mumbai
Leveraging on its acquisition of a controlling stake in SML Isuzu, auto major Mahindra and Mahindra (M&M) is eyeing a 21 per cent share in light commercial vehicle (LCV) bus segment, along with a quicker entry into electric and CNG-powered buses.
M&M on Saturday announced that they have entered into an agreement to acquire 58.96 per cent in SML Isuzu for Rs 555 crore at Rs 650 per share. Following this, M&M will launch a mandatory open offer to acquire up to an additional 26 per cent stake from public shareholders at Rs 1,554.6 per share, upto Rs 585 crore. This is a 12 per cent discount to the scrip's previous close of Rs 1,766.7. The market gave a thumbs-up to the deal with M&M stock trading higher, and SML Isuzu stock hitting a 10 per cent lower circuit.
Speaking to reporters in Mumbai, Rajesh Jejurikar, executive director and CEO (auto and farm sector) at M&M said that SML Isuzu is developing an electric bus and it also has a presence in the CNG space. Thanks to this acquisition, M&M would gain access to these where it currently does not have presence.
In the LCV bus segment, SML Isuzu enjoys a 16 per cent share and the combined entity will have a 21 per cent share of the market, catapulting it to the third spot in this sub-segment.
SML Isuzu had showcased the electric vehicle- Hiroi.ev- in January's Bharat Mobility Global Expo and had indicated that they would look at rolling it out in the April-June quarter of this year. The company's Hiroi.ev bus platform has been designed for intra and inter-city transportation. M&M wants to focus on the intra-city bus segment for the moment.
The Centre is planning to procure the 14,028 electric buses for states in multiple tranches. The procurement is part of the heavy industries ministry's plan to spend around 40 per cent of the Rs 10,900 crore PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme for electric public transport. The ministry had allocated Rs 4,391 crore to buy 14,028 e-buses for states at a subsidised price by the end of 2025-26.
While M&M did not wish to comment on timelines for the launch as the deal is underway, Vinod Sahay – president, Aerospace and Defence, Truck Busses and CE, Mahindra Group, said that the e-bus project is definitely one of the main focus areas for M&M. Moreover, SML Isuzu also has a strong CNG range, something M&M is keen to develop.
Apart from fresh product ranges, the sales and service footprint also doubles. At the moment, each of the dealerships would not start selling both brands, and this decision would be taken cautiously depending on market dynamics. The service networks will, however, be shared. The combined dealer outlets would be around 220, while service touch points would be over 400.
In the medium-heavy commercial vehicle (MHCV) segment, where M&M now has a 2 per cent share, they are targeting a five per cent share in next five years. In the over 3.5 tonne CV market, M&M currently ranks at the fifth position with a 3 per cent share. M&M has a 52 per cent share in the sub-3.5T LCV market. With this transaction, M&M expects to double its market share in the over 3.5T segment to 6 per cent initially, and further targets 10–12 per cent by FY31 and over 20 per cent by FY36.
Jejurikar clarified that MHCV buses are not the area of focus. 'We are not looking at that in the short run,' he said.
M&M does not see the capex for its trucks and bus division to go up as a result of this acquisition. Jejurikar said that they have adequately provided for multiple product initiatives.
'The SML Isuzu-M&M combined business will generate a reasonable amount of cash, and we feel is self-sufficient for the investments that are needed. we had planned certain investments in our trucks and bus business, which we have shared as part of the overall auto investment,' he said.
As such, the SML Isuzu plant, which has a capacity of around 35,000 units a year too does not need any immediate investment. Sahay said that at present the plant is running at 65 per cent capacity utilisation or so.
M&M does not have any immediate plans to legally merge the two entities. Each company will continue to run as a separate legal entity even as operational processes like sourcing, service networks, and platform sharing will be aligned to drive efficiencies.