Mahindra & Mahindra , one of India's leading automotive manufacturers, is taking proactive steps to address the potential shortage of rare earth magnets caused by China's export restrictions. The company is implementing a two-pronged approach, focusing on alternative sourcing channels and engineering solutions to mitigate the impact on its production and future growth plans.

Short-Term Measures and Inventory Management

Group CFO Amarjyoti Barua has reassured stakeholders about the company's preparedness for the immediate future. According to Barua, Mahindra & Mahindra has successfully built up its inventory through alternative sources, ensuring a buffer against potential supply disruptions. This strategic move is expected to shield the company from major risks for the next nine months.

Long-Term Strategy and Engineering Solutions

While the company's short-term needs are addressed, Mahindra & Mahindra acknowledges that its ambitious growth plans require more substantial long-term solutions. The automotive giant is now focusing on developing engineering alternatives to manage the shortage beyond the current tactical measures. These efforts are crucial for sustaining the company's expansion, particularly in the electric vehicle (EV) segment.

Impact on the Automotive Industry

The shortage primarily affects neodymium-iron-boron magnets, which are essential components in electric vehicle traction motors and power steering systems. This issue has raised concerns across the automotive sector, with rating agencies Icra and Crisil previously warning that industry inventories of these critical magnets could be depleted by mid-July, posing significant supply chain risks.

Industry-Wide Concern

Mahindra & Mahindra is not alone in facing this challenge. Other major players in the Indian automotive market, including Maruti Suzuki and Hyundai Motor India, have also acknowledged the shortage. However, these companies have reported no immediate impact on their production schedules.

Looking Ahead

As Mahindra & Mahindra continues to navigate these supply chain challenges, the company's proactive approach in securing alternative sources and developing engineering solutions demonstrates its commitment to maintaining production stability and supporting its growth trajectory. The success of these initiatives will be crucial not only for Mahindra but also for the broader Indian automotive industry as it transitions towards increased electrification and sustainable mobility solutions.

The company's ability to manage its supply for FY26 is a positive sign, but the ongoing efforts to develop more robust, long-term solutions will be key to watch in the coming months and years.

Mahindra & Mahindra Limited (M&M) has successfully completed a significant strategic move in the commercial vehicle sector by acquiring a controlling stake in SML Isuzu Limited. The company announced that it has finalized the acquisition of a 58.96% equity stake in SML Isuzu for ₹555.00 crore, marking a major expansion in its commercial vehicle portfolio.

Key Highlights of the Acquisition

• M&M acquired a 43.96% stake from Sumitomo Corporation and a 15% stake from Isuzu Motors Limited.
• The acquisition was completed at ₹650.00 per share.
• SML Isuzu has now become a listed subsidiary of Mahindra & Mahindra.
• M&M will launch a mandatory open offer for up to 26% additional stake from public shareholders at ₹1,554.60 per share.

Strategic Implications

This acquisition significantly strengthens Mahindra's position in the commercial vehicle market, particularly in the trucks and buses segment. Currently, M&M holds a 3% market share in the >3.5T CV segment, compared to its dominant 52% share in the light commercial vehicle segment.

SML Isuzu's Performance

SML Isuzu brings valuable assets to the Mahindra group:

• Reported operating revenue of ₹2,196.00 crore in FY24
• EBITDA of ₹179.00 crore in FY24
• Market-leading position in the ILCV Buses segment with approximately 16% market share

Mahindra's Growth Targets

With this acquisition, Mahindra has set ambitious growth targets for its commercial vehicle business:

• Increase market share in the >3.5T CV segment to 6% initially
• Target 10-12% market share by FY31
• Aim for over 20% market share by FY36

Industry Impact

This strategic move is expected to reshape the competitive landscape in the Indian commercial vehicle market. By combining Mahindra's strong presence in the light commercial vehicle segment with SML Isuzu's expertise in buses and trucks, the merged entity is poised to offer a more comprehensive range of commercial vehicles to customers.

Regulatory Compliance

As part of the regulatory requirements, Mahindra & Mahindra will undertake necessary actions in compliance with its obligations under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 in relation to the Open Offer.

The acquisition of SML Isuzu represents a significant step in Mahindra & Mahindra's strategy to expand its footprint in the commercial vehicle sector. As the integration process unfolds, industry observers will be keenly watching how this move impacts the competitive dynamics of the Indian automotive market.