Shares of SML Isuzu Ltd slumped 10% to ₹1,596.10 in Monday’s early trade after Mahindra & Mahindra Ltd (M&M) announced the acquisition of a 58.96% stake in the commercial vehicle company. The sharp sell-off comes amid investor concerns over the deep discount at which Mahindra is acquiring the stake and the lack of fresh capital infusion for SML Isuzu.
Mahindra will purchase the stake for ₹555 crore, buying 43.96% from Sumitomo Corporation and 15% from Isuzu Motors at a price of ₹650 per share — a steep 63% discount compared to SML Isuzu’s previous close of ₹1,773.40.
Adding to the sentiment pressure, Mahindra will also launch a mandatory open offer for up to 26% of public shareholding at ₹1,554.60 per share, in line with SEBI Takeover Regulations.
Despite the open offer being priced higher, the valuation at ₹650 per share for the controlling stake has created a perception of reduced intrinsic value, weighing heavily on SML’s market price.
Moreover, analysts noted that the deal provides no fresh capital to SML Isuzu. Investors were likely expecting a capital infusion to support future growth, but the current structure involves only a transfer of ownership.
Strategic rationale behind the move:
Mahindra is aiming to strengthen its commercial vehicle (CV) presence, especially in the >3.5 tonne segment where it currently holds just a 3% market share. With the acquisition, Mahindra expects to double its market share to 6% immediately, and targets reaching 10–12% by FY31 and over 20% by FY36.
While brokerages like Citi and Morgan Stanley have maintained positive views on Mahindra post this deal, citing potential synergies in supply chain, manufacturing, and products, the steep discount at which the stake was bought has rattled sentiment around SML Isuzu’s standalone valuation.
Brokerage highlights:
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Citi has maintained a Buy rating on Mahindra with a target price of ₹3,680, saying the acquisition offers avenues for growth in the CV segment.
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Morgan Stanley reiterated its Overweight rating on Mahindra, highlighting that the cash consideration is unlikely to dent M&M’s balance sheet and the valuation is still reasonable compared to peers.
Despite the broader strategic positives for Mahindra, investors in SML Isuzu have reacted negatively to the immediate 63% discount valuation and the absence of capital support, driving the stock sharply lower.
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