Why this smallcap auto stock fell 10% in trade on Apr 28? Check details

Business Standard

28-04-2025

M&M's board has approved acquiring Sumitomo Corporation's 44 per cent stake in the company at a price of ₹650 per share along with Isuzu Motors 15 per cent stake at the same price of ₹650 per share.
Mumbai
SML Isuzu share price today: Share price of SML Isuzu locked in lower circuit of 10 per cent at ₹1,590.05 on the BSE in Monday's intra-day trade after Mahindra & Mahindra (M&M) informed that its board has approved acquiring Sumitomo Corporation's 44 per cent stake in the company at a price of ₹650 per share along with Isuzu Motors' 15 per cent stake at the same price of ₹650 per share. M&M's acquisition price is at a 63 per cent discount to the company's Friday closing price of ₹1,766.70 on the BSE.
Till 10:33 am, a combined 93,000 equity shares had changed hands and there were pending sell orders for 110,000 shares on the NSE and BSE.
Past price performance of SML Isuzu
Mahindra to acquire 58.96 per cent stake in SML Isuzu for ₹555 crore
M&M on Saturday, April 26, 2025, announced that it has entered into an agreement to acquire 58.96 per cent stake in SML Isuzu at ₹ 650 per share, which is an outlay of ₹555 crore. In addition, M&M will make an open offer in accordance with SEBI Takeover Regulations.
The proposed acquisition is a step towards establishing a strong presence in the >3.5T commercial vehicle (CV) segment, where M&M has a 3 per cent market share today, as compared to a 52 per cent market share in the <3.5T LCV segment. M&M's Trucks and Buses Division has made meaningful progress over the past few years. This acquisition would double the market share to 6 per cent, with a plan to increase this to 10 – 12 per cent by FY31 and 20 per cent plus by FY36.
As part of the transaction, M&M would acquire the entire stake of 43.96 per cent held by Sumitomo Corporation, promoter of SML Isuzu, and separately also acquire 15 per cent stake held by Isuzu Motors Ltd, public shareholder of SML Isuzu, for an aggregate consideration of ₹555 crore. M&M would also launch a mandatory open offer for the acquisition of up to 26 per cent stake from eligible public shareholders of SML Isuzu in accordance with the SEBI Takeover Regulations.
The proposed acquisition is subject to completion of customary closing conditions including receipt of CCI Approval, and is expected to be completed by December 31, 2025. The open offer will be completed in accordance with the takeover regulations.
M&M's objects and impact of acquisition of SML Isuzu
M&M said the acquisition will enable the company to strengthen its presence in the trucks and buses segment by unlocking operational synergies, enhancing product development capabilities, and expanding market reach. It supports the company's long-term growth vision in the commercial vehicle industry.
Brokerage view – ICICI Securities
The total acquisition price of SML Isuzu for M&M worked out at ~₹ 1,750 crore (Enterprise Value) which is at a very lucrative valuations from M&M's standpoint, i.e., ~0.8x P/S, ~8x EV/EBITDA and ~12x P/E on TTM basis.
Acquiring SML Isuzu could prove to be a strategic fit for M&M given its absence in the buses segment. M&M sees this acquisition as a step towards establishing a strong presence in the >3.5T CV segment, where it has a 3 per cent market share today. The brokerage firm has a positive view on M&M.
Share price of M&M today
Shares of M&M have rallied 3 per cent to ₹2,940.25 on the BSE in intra-day trade. The stock had hit a 52-week high of ₹3,276.30 on February 10, 2025.
About SML Isuzu
SML Isuzu, an auto original equipment manufacturer (OEM) operating in the commercial vehicles (CV) space, is primarily in the business of manufacturing and sale of light commercial vehicles (LCVs) and medium commercial vehicles (MCVs) in the automobile industry and has a product portfolio comprising buses, trucks, and specific application vehicles.