Analysts believe that the decision of Mahindra & Mahindra (M&M) to buy a large stake in SML Isuju may be a profitable deal. He says that M&M with this deal Commercial vehicle (CV) will help strengthen portfolio (mainly trucks and buses) and increase market access.
ICICI Securities said, ‘We are considering this deal as positive for M&M. This will help him to remove flaws in vehicle portfolio through mutual coordination in cost, network, manufacturing, platform and supply raising.
SML Isuju is associated with manufacturing and sales of light commercial vehicles (LCVs) and medium /heavy commercial vehicles (MHCV) and its vehicle portfolio includes buses, trucks and specialized vehicles. The company is in the market in the market in the intermediate light commercial vehicle (ILCV) bus segment with 16 per cent market participation. Since the announcement of the deal on 26 April, M&M’s stock has strengthened 1.4 percent.
M&M will acquire 58.96 percent equity in SML Isuju by December 2025. In this, M&M will buy 43.96 per cent stake from Sumitomo Corporation and 15 per cent of Isuju Motors Limited for Rs 555 crore. An open offer will also come for the acquisition of an additional 26 percent equity for Rs 585 crore. The value of SML Isuju, a company listed in the deal, has been estimated at 8 times PE based on the last twelve months (TTM).
Nuwama Institutional Equities believe that the acquisition of this 85 per cent stake (59+26 per cent) for Rs 1,140 crore will be slight EPS for M&M. Brokerage has maintained a ‘buy’ rating with a price target of Rs 3,700 for M&M shares. Nuwama has said that
The acquisition of M&M in the 3.5 tonnes of CV segment will increase from the current 3 per cent to 6 per cent. Mahindra is present in the M&M MHCV segment as Truck and Bus Division (MTBD).
Management wants to increase this market participation from financial year 2031 to 10-12 percent and 20 percent by FY 2036. The partnership of the joint unit in the LCV bus segment is estimated to increase to 21 per cent, which is currently 16 per cent for SML Isuju. Nomura has given a ‘buy’ rating for M&M with a price target of Rs 3,681. MK Global has maintained a ‘Add’ rating with an unchanged price target of Rs 2,700 for the stock.
First Published – May 1, 2025 | 10:43 pm IST
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