Synopsis
Shares of SML Mahindra surged on Thursday after the company announced Rs 525 crore acquisition of Mahindra & Mahindra’s truck and bus division. Analysts view the deal positively, citing stronger market positioning, operational synergies and increased long-term profits, although some short-term margin dilution could persist after the business integration.
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AgenciesThe acquisition is expected to be completed no later than January 31, 2027.Shares of SML Mahindra surged over 18 per cent to hit an intraday high of Rs 5,416 on the BSE on Thursday after the company touched Rs 525 crore. downsell acquisition of Mahindra & Mahindra’s Truck and Bus Division.
A fire sale refers to the transfer of an entire business enterprise as a going concern for a lump sum consideration, rather than the separate sale of individual assets and liabilities.
In a regulatory filing on Wednesday, Mahindra & Mahindra (M&M) revealed that it will transfer its Trucks and Buses Division (MTBD) to its listed subsidiary. SML Mahindra Limited for Rs 525 crore, consolidating the group’s commercial vehicle operations under a single entity.
Read also | SML Mahindra to acquire Mahindra’s truck and bus business for Rs 525 crore
The acquisition is expected to be completed no later than January 31, 2027, according to the filing.
M&M said the proposed transfer of MTBD to SML was a natural next step, following M&M’s acquisition of a 58.97% stake in SML Mahindra Limited (formerly SML Isuzu Limited) from Sumitomo Corporation and Isuzu Motors Limited.
According to Dr. Anish Shah, CEO and Managing Director, Mahindra Group, the transaction simplifies Mahindra Group’s business. commercial vehicle company structure by consolidating truck and bus operations under SML Mahindra, creating a single entity dedicated to growth and leadership in the commercial vehicle sector.
The group’s truck and bus division is stronger on the heavy commercial vehicle front. M&M will contract manufacture heavy commercial vehicles for SML, under this agreement, from its Chakan plant.
The combined revenues of SML Mahindra and MTBD stand at nearly Rs 6,000 crore, according to public information.
Brokerage recommendationJM Financial has recommended a ‘Buy’ on SML Mahindra, setting a price target of Rs 3,800. The brokerage sees up to 16.2% upside potential in the stock and views this acquisition in a positive light for M&M’s standalone business. The brokerage said in its note that MTBD has historically been margin dilutive, despite positive EBITDA since FY24.
The combined company will rank fourth in the nation’s truck and bus market, according to JM Financial. The note further stated that the combined entity is expected to benefit from operating leverage, pricing power and realization of synergies, which would offset the temporary dilution, and management believes that the transaction will be EPS accretive for SML Mahindra over time.
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SML Mahindra share priceAfter the stock soared 20% on Wednesday, the stock continued its rise and gained over 18% on Thursday, after a previous close of Rs 4565.50. The stock has gained more than 15% this month.
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