Mahindra & Mahindra has acquired SML Isuzu, a key player in the small and medium sized CV market in India. But can this give the company its long-sought competitive edge.
11 Jun 2025 | 5024 Views | By Shahkar Abidi & Ketan Thakkar
In 2020, Mahindra & Mahindra (M&M), the Mumbaibased conglomerate synonymous with rugged SUVs and hardy farm equipment, articulated a clear vision: a transformation of its commercial vehicle (CV) business. The goal was ambitious – to mirror the market leadership it enjoyed in passenger vehicles and tractors within the highly competitive ...
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In 2020, Mahindra & Mahindra (M&M), the Mumbaibased conglomerate synonymous with rugged SUVs and hardy farm equipment, articulated a clear vision: a transformation of its commercial vehicle (CV) business. The goal was ambitious – to mirror the market leadership it enjoyed in passenger vehicles and tractors within the highly competitive CV landscape. Five years into this strategic pivot, that vision is beginning to materialize, underscored by a pivotal development: the planned acquisition of SML Isuzu Ltd.
The conglomerate announced its intent to acquire the entire 43.96% stake held by the promoter Sumitomo Corporation and another 15% stake held by public shareholder Isuzu Motors Ltd. The aggregate consideration for these combined stakes, totaling 58.96% of SML Isuzu, was stated as Rs 555 crore. Mahindra is also launching a mandatory open offer to acquire up to an additional 26% stake from the eligible public shareholders of SML Isuzu.
This transaction marks a decisive moment for M&M, positioning the Mumbai-headquartered group to become a more substantial, potentially formidable contender in segments where its presence has historically been modest. By strategically integrating the strengths of SML Isuzu, particularly in intermediate and light commercial vehicles (ILCVs) and buses, M&M executives project a future valuation for their overall trucks and business potentially reaching $2–3 billion within the next few years.
SML Isuzu has a rich history and has carved out a distinct niche within the Indian commercial vehicle market since its founding in 1983. Initially established as Swaraj Mazda Ltd., it began as a joint venture involving Punjab Tractors Ltd. (part of the Swaraj Group), alongside Japanese partners Mazda Motor Corporation and Sumitomo Corporation. Over time, the ownership structure evolved, and the company eventually transformed into SML Isuzu Ltd., with Isuzu Motors Ltd. becoming a key stakeholder alongside Sumitomo Corporation.
This evolution reflects a blending of Indian manufacturing ingenuity with Japanese precision engineering and quality standards. The company has established a particularly strong foothold and reputation in the intermediate and light commercial vehicle (ILCV) bus segment, where it is known for its robust and reliable offerings catering to various applications.
However, SML Isuzu’s overall portfolio showcases considerable diversity extending beyond buses. The company has manufactured a range of trucks under established names such as the Sartaj, Samrat, Prestige, and Supreme, targeting various payload capacities and applications within the light and intermediate segments. Furthermore, its bus offerings are diverse, serving applications ranging from school buses and staff transportation to tourist coaches.
Beyond standard commercial haulage and passenger transport, SML Isuzu has also produced specialized vehicles, including ambulances, police carriers, and water tankers, demonstrating manufacturing flexibility and capability to meet specific customer requirements.
The Mahindra Context
The acquisition comes as a key part of Mahindra’s multi-year strategy to grow and establish itself in key segments, particularly in the >3.5-tonne Gross Vehicle Weight (GVW) CV segment. Speaking to reporters and analysts at a briefing hastily convened following the announcement of the SML Isuzu acquisition plans, Anish Shah, Group CEO and Managing Director of the Mahindra Group, underlined the deal's strategic alignment with the company’s long-term strategic blueprint.
He framed the transaction not as an isolated event, but as a calculated step consistent with M&M's established trajectory "of building market leadership across its core sectors". Shah pointed to Mahindra’s successes in the SUV space, where it is number one with a 23% revenue market share, and in tractors, where it has a whopping 43.3% share of the market. He also pointed to gains in the rapidly growing electric three-wheeler market, where it commands a 43% share.
However, in the CV space, M&M’s performance depends on the weight category. M&M has unequivocally cemented its leadership in the light commercial vehicle space, especially in the category with a gross vehicle weight (GVW) below 3.5 tonnes, where it controls an impressive 51.9% market share. This dominant position is largely attributable to the sustained success and enduring popularity of the Bolero Pik-Up series, which has consistently been a highvolume driver for the company in the pickup segment.
Remarkably, M&M has maintained its position as the unchallenged leader in the sub-3.5-tonne LCV segment for nearly a decade and has led the pickup segment, a critical component of the sub-3.5t category, for about 25 years. The sales figures further illustrate this dominance: In FY24, M&M sold a total of 2,62,810 commercial vehicles across all categories: 44,093 units with a GVW of less than 2 tonnes and a substantial 1,91,603 units in the 2-3.5 tonne range.
However, the picture changes dramatically in the segments above 3.5 tonnes—including Intermediate Commercial Vehicles (ICVs), Medium Commercial Vehicles (MCVs), and Heavy Commercial Vehicles (HCVs). In these heavier segments, M&M’s dedicated division, the Mahindra Truck and Bus Division (MTBD), holds a modest market share of around 3% as of FY25.
The sales figures for FY24 in these heavier categories underscore the scale difference compared to LCVs: the company sold 15,809 units in the LCV category with a GVW between 3.5-7.5 tonnes (often categorized as light-duty trucks), 1,818 units in the 7.7-12 tonne segment (part of ICVs), 6,146 heavy commercial vehicles (HCVs typically >16 tonnes), and 3,341 LCV passenger vehicles (vans and minibuses based on LCV platforms).
M&M's market share in vehicles above 3.5 tonnes GVW stood at around 5% in FY19. This share subsequently experienced a decline, dropping to around 2.5% in the wake of the pandemic-induced slowdown and the significant industry-wide disruption caused by the transition to Bharat Stage VI (BS-VI) emission norms, which required substantial investments and product overhauls across the industry. It currently remains at 3%.
This fluctuating and relatively low market share underscores the scale of the challenge M&M faces, and highlights the strategic imperative behind seeking inorganic growth avenues like the SML Isuzu acquisition to accelerate its trajectory in this segment, industry analysts pointed out. “We’re number five with a 3% market share today,” Shah acknowledged. M&M has been evaluating its commercial vehicle business closely for the past five years, particularly the performance of the heavier CV segments. "It was under the capital allocation microscope back then," Shah said, acknowledging the scrutiny the business faced during the initial phase of strategic restructuring.
Synergies and Market Presence
For Mahindra, the focus of the SML Isuzu acquisition will be on replicating success in other categories of the commercial vehicle market – segments above 3.5 tonnes GVW, particularly ILCVs. Mahindra executives outlined their immediate expectations for the combined entity following the integration of SML Isuzu. They project that the acquisition will immediately boost their market share in the truck and bus segments upward of 3.5 tonnes GVW to over 6%. Furthermore, they anticipate a combined revenue exceeding Rs 5,000 crore from the expanded commercial vehicle operations.
Looking further ahead, the company has set aggressive market share targets: aiming for a 10-12% share by fiscal year 2031 and ultimately targeting over 20% by FY2036. Besides the product portfolio, M&M will also seek to take advantage of SMLI’s sales and distribution networks. The acquired company has a robust distribution network throughout India, including dealers and service touchpoints.
This provides M&M with immediate access to new customer bases and geographical markets, particularly valuable in the ILCV and bus segments where SML has a stronger presence than MTBD. SML Isuzu also has established export operations, extending its market reach to neighboring countries like Nepal, Bangladesh, and Sri Lanka, as well as various regions in Africa and West Asia.
These export channels offer M&M opportunities to leverage SML's existing international footprint and potentially expand its own global CV ambitions. Offering insights into the company's exports plans, Vinod Sahay, President of Aerospace & Defence, Trucks, Buses & CE at Mahindra Group said, "We'll have to better understand how both the brands can leverage on that." The focus on exports also aligns with Mahindra Truck and Bus Division's plans in striving to surpass its FY19 export peak when exports constituted 10% of total sales.
As of July last year, exports account for about 5% of Mahindra's sales, Autocar Professional reported. Looking forward, Mahindra has a robust plan to leverage its international presence. Company executives highlighted that in the long term, their strategy is to build on Mahindra group's existing footprint across various continents. For example, the Mahindra group already has a strong presence in South America, Africa, Australia, and other regions.
The Scorpio brand which is popular in Australia, and Mahindra tractors are well-regarded in Brazil, where the company is setting up an assembly line for tractors and has begun exporting construction equipment. Besides the above segments, SML Isuzu has also invested in compressed natural gas (CNG) and electric vehicles, which are gaining traction in certain urban areas due to environmental regulations and lower operating costs.
SML Isuzu is also in the advanced stages of developing electric buses, a segment expected to witness significant growth driven by government tenders and increasing environmental consciousness. Sahay acknowledged that these capabilities, particularly in CNG and electric vehicles, make SMLI an attractive partner, particularly in the context of expanding Mahindra's footprint in green mobility solutions within the commercial vehicle space.
"The acquisition provides M&M with a ready platform and expertise in these crucial future technologies," he noted. Jugnu Sakuja, Managing Director at Alvarez & Marsal’s Business Transformation Services, pointed out that companies are being compelled to re-focus on their core competencies and allocate resources keeping in mind the evolving energy transition landscape.
"Companies are looking to monetize what they consider as non-core businesses while others are using it to build scaled portfolios," Sakuja explained, framing M&M's acquisition within a larger industry trend driven by technological disruption and the need for increased scale and focused investment. Sunil Kalra, Partner, Governance, Risk and compliance and Forensic Investigation Services, Forvis Mazars India, links the consolidation trend to companies’ need to build a horizontal portfolio spanning different segments and acquire larger market share.
"The recent acquisition by an automotive major points to changing contours of this industry and the future will witness more such ventures and fierce clashes amongst auto manufacturers," Kalra explained. Beyond bolstering M&M’s product and market presence, the merger is also expected to yield traditional costrelated benefits. SML Isuzu operates a manufacturing plant located in Punjab, which is believed to be currently operating at around 60-70% capacity utilization. Jejurikar pointed to cost optimization, platforms, aggregate manufacturing, and supplier collaboration as potential areas of cost saving.
For example, SMLI’s in-house capabilities in manufacturing aggregates present an opportunity for a more streamlined cost structure. Similarly, Mahindra’s expertise in engine technology could complement SMLI’s manufacturing prowess, facilitating cross-deployment of technology and parts. "Immediate synergies as you can see are that the company we are acquiring is profitable, very frugal manufacturing," he noted, pointing to SML's operational and financial health as key attractions that mitigate some of the typical risks associated with acquisitions and expansions in competitive sectors.
The acquisition also leverages local procurement, particularly through the Swaraj Tractors supplier ecosystem in Punjab, potentially strengthening cost efficiencies. In the bus segment, SMLI's 16% market share in the LCV bus category, when combined with Mahindra’s existing share, will elevate the combined entity's presence to 21%. This consolidation is expected to enhance crossplatform sharing of aggregates and cabin components. Furthermore, Mahindra’s Automotive & Farm Sector (AFS) division, with its established sourcing power, is set to boost procurement efficiency, particularly for shared suppliers and industry-standard aggregates.
Despite the merger, Mahindra intends to retain the SML brand due to its established reputation. "SML is a very strong brand by itself now with time, and we would retain the SML brand." added Jejurikar. Financial analysts have generally reacted with cautious optimism to Mahindra & Mahindra's acquisition of SML Isuzu and its revitalized commercial vehicle strategy. The consensus is that the deal is strategically positive, offering M&M a much-needed avenue to address gaps in its CV portfolio, particularly in the bus and ILCV segments, and to gain critical scale in the >3.5-tonne category.
ICICI Direct, for instance, noted that the price paid by M&M for the promoter’s stake (59%) at Rs 650/share is Rs 555 crore is at a significant discount to the current market price (SML Isuzu last traded at Rs 1,773/share and is “steal deal for M&M". As per Nomura, with SML’s acquisition, it believes M&M’s ‘right to win’ will improve significantly with complementary product portfolio, access to CNG/EV portfolio, in-house bus building capability, doubling of network (over 100 dealers and over 200 touchpoints), and synergy sourcing benefits given the scale.
While the acquisition lays the groundwork for scaling M&M’s commercial vehicle business, execution will be critical. Integrating SMLI’s operations, optimizing manufacturing, and expanding the product lineup without diluting the brand's identity will require strategic acumen. The commercial vehicle sector’s long gestation period and high R&D costs also pose challenges. The company’s holistic approach—from LCV dominance to MHCV aspirations—will ultimately determine whether this acquisition turns M&M into a heavyweight contender in the commercial vehicle arena.
Mahindra’s MHCV Challenge
While the acquisition of SML Isuzu will doubtless help Mahindra & Mahindra make inroads into the light and intermediate CV market, the Medium and Heavy Commercial Vehicle will continue to remain a challenge for the automaker. Rajesh Jejurikar, Executive Director and CEO of Mahindra’s Auto and Farm Sector, offered a cautious assessment of the company’s chances of trying to address that challenge through a similar acquisition.
"We remain mindful that the MHCV segment is a very competitive segment," he said, when asked whether such a move can be expected in the future, adding: "We have been very realistic about the growth aspirations we have in that segment." While the heavier commercial vehicle space indeed remains intensely competitive, Jejurikar's comments and M&M's cautious framing should also be seen in the broader context of Mahindra's past experiences in attempting to significantly beef up its business in this segment.
The auto giant earlier embarked on a notable joint venture in the mid-2000s with Navistar International of the United States, a prominent player in the North American commercial vehicle market. The joint venture, known as Mahindra Navistar Automotives Ltd. (MNAL) and Mahindra Navistar Engines Pvt. Ltd. (MNEPL), aimed to establish a comprehensive presence across the Indian CV market, from LCVs to HCVs. Under this partnership, the JV launched a range of commercial vehicle models, including heavy-duty trucks under names like MN25, MN31, Truxo, and Torro, alongside other light and medium offerings.
However, the Mahindra-Navistar venture faced considerable challenges in achieving its objectives. These included significant difficulties in gaining sufficient market acceptance and traction against deeply entrenched domestic players like Tata Motors and Ashok Leyland, which commanded vast market share and extensive distribution networks.
The intense competitive pressures of the Indian CV market, characterized by price sensitivity and strong brand loyalty to incumbents, proved a formidable barrier. Furthermore, Navistar's own financial troubles and strategic realignments in its home market during that period likely impacted its ability to provide sustained and adequate technical, financial, and strategic support to the Indian joint venture.
By 2012-2013, M&M decided to alter the course, eventually taking full control by buying out Navistar's stake in both joint venture entities. The business units operating under the JV structure were subsequently demerged and integrated directly into Mahindra & Mahindra Ltd. to operate as the Mahindra Truck and Bus Division (MTBD).
Despite this restructuring and integration, the MTBD division consistently struggled to meet internal profitability targets and achieve desired market share levels, leading to periodic strategic reviews and financial impairments related to the assets and investments made in the business. This historical experience with Navistar provides crucial context for understanding M&M's current, more phased, and seemingly cautious approach to expanding in the MHCV space, emphasizing profitability and strategic fit, as demonstrated by the SML Isuzu acquisition.