IGI Logo

Acquires Meru from M&M

Mahindra Logistics (MLL) has announced the acquisition of Meru. The deal consists of i) acquisition of 100% equity share capital of Meru Mobility Tech Private Limited, V-Link Fleet Solutions Private Limited and V-Link Automotive Services Private Limited from Meru Travel Solutions Private limited (MTSPL) – these are wholly owned subsidiaries of MTSPL and ii) acquisition of 100% equity share capital of MTSPL from Mahindra & Mahindra Limited (M&M). The total consideration (cash) is ~Rs1bn. Management expects this acquisition to boost the company’s enterprise mobility business, with a strategic focus on enterprise customers and electric mobility. As per Ministry of corporate affairs (MCA), MTSPL top line has steadily declined from Rs3.95bn in FY16 to ~ Rs443mn in FY21, and it has never reported a profit. Highest EBITDA print was in FY17 of Rs255mn (with a top line of Rs2.9bn). FY21 EBITDA and PAT loss was Rs19.2mn and Rs30.4mn, respectively. The range of investor perception (based on our interaction) on the related-party transaction is careworn to blithe. We maintain HOLD.

* Acquisition rationale as per management. The acquisition is a strategic move to consolidate and expand MLL’s business in the enterprise mobility space. The addition of Meru under its brand will further strengthen MLL’s mobility business. MLL is already a leader in its Enterprise Mobility Service (ETMS) business, which operates under the ‘Alyte’ brand. With this acquisition, MLL will enhance its range of mobility solutions with strategic focus on enterprise customers and electric mobility.

* Commentary of MD and CEO. MLL anticipates significant synergies by leveraging the combined capabilities in supply, technology management and electric mobility. The combined capabilities of Meru and Alyte will enable MLL to better serve B2C and enterprise customers with an expanded portfolio of services delivering on a promise of safety, customer excellence and sustainability.

* Cost of acquisition. The acquisition of shares of three wholly owned subsidiaries of MTSPL from MTSPL will be done for a total consideration of ~Rs505mn. Acquisition of 100% equity share capital of MTSPL from M&M will be done for a total consideration of Rs504mn. This takes the total cash purchase consideration to Rs1,009mn. The consideration payable for the acquisition is as per the fair value determined by an independent valuer - Ernst & Young. The valuation is further supported by a fairness opinion report from Kotak Mahindra Capital Company.

* Maintain HOLD. MLL’s business model has multiple pivots to ensure growth and augment an already attractive investment story. These include contract manufacturing, freight forwarding, multimodal offering and entry into express logistics. We wait for the ‘beat-upgrade’ cycle to resume which has taken a pause for the past few quarters.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer