SML Mahindra shares rally over 18% on acquisition of M&M’s truck division. What it means for shareholders?

Shares of SML Mahindra jumped over 18% to an intraday high of Rs 5,416 on the BSE on Thursday after the company completed the Rs 525 crore slump sale acquisition of Mahindra & Mahindra's Truck and Bus Division.

A slump sale refers to the transfer of an entire business undertaking as a going concern for a lumpsum consideration, rather than the sale of individual assets and liabilities separately.

In a regulatory filing on Wednesday, Mahindra & Mahindra (M&M) revealed that it will transfer its Truck and Bus Division (MTBD) to its listed subsidiary SML Mahindra Limited for Rs 525 crore, consolidating the group's commercial vehicle operations under a single entity.


Also Read | SML Mahindra to acquire Mahindra’s truck and bus business for Rs 525 crore

The acquisition is set to be completed on or before January 31, 2027, as per the filing.

M&M said that 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, Group CEO & MD, Mahindra Group, the transaction simplifies Mahindra Group's commercial vehicle business structure by consolidating truck and bus operations under SML Mahindra, creating a single focused entity dedicated to growth and leadership in the commercial vehicle sector.

The group's truck and bus division is stronger on the heavy commercial vehicles front. M&M will do contract manufacturing of heavy commercial vehicles for SML, as part of the arrangement, from its Chakan plant.

Combined revenues of SML Mahindra and MTBD stand at nearly Rs 6,000 crore, as per public disclosures.

Brokerage Recommendation

JM Financial has recommended a ‘Buy’ on SML Mahindra, setting a target price of Rs 3,800. The brokerage sees up to 16.2% upside potential on the stock, and viewed this acquisition in a positive light for M&M’s standalone business. The brokerage stated in its note that MTBD has historically been margin dilutive, despite turning EBITDA positive since FY24.

The combined business will rank fourth in the domestic 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 synergy realisation, which would outweigh temporary dilution, and management believes the transaction to be EPS accretive for SML Mahindra over time.

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SML Mahindra Share Price

After the stock rallied up to 20% on Wednesday, the stock continued the rally and gained over 18% on Thursday, following a previous close of Rs 4565.50. The stock has gained over 15% in this month.

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