In the case of Cyient Limited, Cyient DLM, its subsidiary was traded in a block deal involving 14.5% of its stake flipped. For instance, JPMorgan advised Cyient to consider opportunities for M&A particularly in the automobile industry. The brokerage also retained an ‘overweight’ stance on Cyient with a price estimate of Rs 2,100.
Image Source: economictimes.indiatimes.com
Cyient’s Core Business
Cyient is an Indian multinational organization that focuses on the global engineering services industry. Cyient is a leading engineering solutions and services provider for industries including aerospace, defense, transportation, telecom, and energy. These include product design, manufacturing engineering, and system integration. Cyient provides geospatial solutions such as Geographic Information Systems or GIS, remote sensing, and spatial data analysis. They help clients in dealing with location-related information for infrastructure development, environmental evaluation, and property management.
Cyient provides network value to telecom, utilities, and other related industries by enhancing network performance, controlling field operations, and adopting digital models. Network engineers specialize in network planning, development, and support. Cyient enters the semiconductors space with design tests and manufacturing verticals.
They also offer services based on the IoT and connected gadgets. More specifically, Cyient uses data analytics to assist clients in different industries with relevant information. It extends from accuracy assurance to predictive supply chain management. Cyient primarily focuses on the sectors of engineering, technology, and data services for domestic and international clients.
Transaction and Net Worth Details
On August 21, 2024, it is estimated that about 1.2 crore shares of Cyient DLM were offered for sale in a block deal. The price at which the transaction occurred was Rs 766 per share and the total worth of the transaction was Rs 883.20 crore. The probable seller in this transaction was Cyient since Cyient DLM was promoted by the company. Cyient DLM generated 17% of Cyient’s total revenue for FY24 at Rs 1,192 crore. The net worth of Cyient DLM as of March 31, 2024 was Rs 909 crore which was considered 20 percent of Cyient’s net worth.
Stake Sale
Cyient said that the stake sale proceeds would be utilized to cater to capital needs, fund the newly launched semiconductor segment, use for organic/inorganic investments, and reduce company liabilities. Following the stake sale, Cyient’s ownership in Cyient DLM will decrease from 66% to 52.16%. The implication of high trade volumes is an indication that the block deal was effected properly.
Perspective of JPMorgan
A brokerage firm JPMorgan also endorsed Cyient on its divestment strategy. They mentioned that the DET business of Cyient involved in the semiconductor vertical has $47 million by the end of June. This liability could be partially retired from the proceeds that would have been generated through the stake sale.
Conclusion
Cyient’s stake sale in its subsidiary is an ideal model to highlight the company’s growth strategy, debt reduction, and investment strategy in new areas. The stock market participants and industry pundits will follow this move to gauge its implications on Cyient’s prospects.
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