Mahindra Eyes Steep Market Share Climb with SML Isuzu Acquisition

Mahindra & Mahindra Ltd. is making a significant bet on accelerating its presence in India's competitive commercial vehicle market. The Mumbai-based auto giant, through its Mahindra Trucks & Bus (MT&B) division, announced aggressive market share targets on Monday following its planned acquisition of SML Isuzu Ltd., a manufacturer known for its light commercial vehicles (LCVs) and buses.

Company executives revealed at a press meet that they expect the combined entity to immediately boost their market share in the truck and bus segments to upward of 6% from MT&B's current 3% share (as of FY2025), projecting combined revenue in excess of Rs 5000 crore. Looking further ahead, Mahindra aims for a 10-12% market share by fiscal year 2031, ultimately targeting over 20% by FY2036.

The move follows Mahindra & Mahindra Ltd.'s agreement to acquire controlling stakes in SML Isuzu. This involves purchasing the entire 43.96% stake held by promoter Sumitomo Corporation and a separate 15% stake held by public shareholder Isuzu Motors Ltd., for an aggregate consideration of Rs 555 crore. Mahindra is also  launching a mandatory open offer to acquire up to 26% stake from eligible public shareholders of SML, adhering to SEBI takeover regulations.

Anish Shah, Group CEO & MD of the Mahindra Group, emphasized the strategic discipline behind the acquisition. "We also have a very structured and disciplined approach where if Mahindra is getting into something and acquiring something, it has to make sense for us overall and which is why the company has been looking at it for a while," Shah stated. He added, "We have not moved forward until it made sense. It makes sense now."

Rajesh Jejurikar, Executive Director and CEO of the Auto and Farm Sector at Mahindra & Mahindra, acknowledged the challenging landscape of the Medium and Heavy Commercial Vehicle (MHCV) segment. "We remain mindful that the MHCV segment is a very competitive segment," Jejurikar said. He clarified the company's strategy: "We have been very realistic about the growth aspirations we have in that segment." Jejurikar highlighted the strategic alignment with Mahindra's existing strengths in LCVs, particularly its pickup truck portfolio, where SML's capabilities are seen as complementary. "Immediate synergies as you can see are that the company we are acquiring is profitable, very frugal manufacturing," he noted.

Company officials indicated that while some investment will be needed to integrate SML Isuzu's operations and products, the acquired business is expected to be largely self-sufficient in funding these requirements through its own cash generation. Furthermore, Mahindra has already factored in investments for its truck and bus business as part of its overall automotive capital expenditure plans shared over the past few years.

Shah added that SML Isuzu brings a strong product portfolio, benefiting from significant investments over the last four years and leveraging technology associations. "They have leveraged the overall technology association and have good quality offerings," he said, describing the SML plant as a "very well-run, frugally designed factory." While acknowledging it "does need some investments," he stressed it was "nothing dramatic."

SML Isuzu, originally incorporated in July 1983 as Swaraj Vehicles Limited, was established to manufacture Light Commercial Vehicles (LCVs) in Punjab, partly driven by a government initiative focused on fuel efficiency. Today, the company offers a diverse range of diesel and CNG trucks and buses, special application vehicles, and is developing electric versions of its products.

Mahindra executives highlighted that the MT&B business has performed "very well in the last five years," enabling this strategic step. Like many peers, the business faced a downturn during the Covid-19 pandemic due to reduced demand and supply chain disruptions but has since recovered. While Mahindra is not targeting heavy bus segments like state transportation or intercity routes, it holds a strong position (around 21% market share) in the school and staff bus segments.

Integrating the dealer and service networks is a key focus. With the two brands collectively boasting over 100 dealers and 200 touch points each, which include service centers, there is a significant opportunity for synergy. "To begin with, that's one area where we want to focus where complimentary networks can be given to each other's brand especially when it comes to after sales service," said Vinod Sahay,  President, Aerospace & Defence, Trucks, Buses and CE, at Mahindra Group while speaking on the integration plans.