Cyient gains 6% on 14.5% stake sale plan in subsidiary; Cyient DLM slips 3%

Cyient, Cyient DLM divestment news: Cyient share price today rallied 6 per cent to Rs 2,049.95 on the BSE in Wednesday's intraday trade. The surge came after the company informed the stock exchanges that it has approved the sale of up to around 11.5 million equity shares, or approximately 14.5 per cent of its stake in subsidiary Cyient DLM, through the block deal window mechanism. The sale is expected to be completed by August 21, 2024, the company said.

At 09:15 am, as many as 11.87 million equity shares, representing 14.96 per cent of total equity of Cyient DLM, changed hands on the BSE, exchange data shows. The names of the buyers and sellers, however, could not be ascertained immediately. 

Cyient DLM share price, however, fell 3 per cent to Rs 764.05 in the intraday trade.

Cyient DLM contributed 17 per cent of Cyient's total revenue in the financial year 2024 and accounted for 20 per cent of the company's net worth as of March 31, 2024. 

In an exchange filing, Cyient said the company's current intent is to utilise the capital proceeds arising from the proposed transaction towards addressing the company's capital requirements, including but not limited to key investments in the recently announced semiconductor business to support its growth, various organic and inorganic investments; and retirement of debts of the company.

"The proceeds will be used for capital requirements, including investments in the semiconductor business and debt retirement. The deal is valued at a little over Rs 900 crore based on Tuesday's closing price. Post the stake sale, Cyient will hold 52.2 per cent in DLM," ICICI Securities said in a note.

Cyient is one of the leading players in the IT-enabled services space, providing services to the Engineering Research and Development segment.

In June 2024 quarter (Q1FY25), the company saw a strong order intake in Connectivity and New growth areas and expects improvement in converting orders in Q2FY25. Besides, it anticipates Ebit margins to normalise in the range of 16 per cent in FY25. While growth in Sustainability is expected to continue, according to analysts at Geojit Financial Services.

The company received more than 15 Gen AI projects in the last quarter, and more deals are expected in FY25. The company is developing an ASIC (Application-Specific Integrated Circuit) for an intelligent neural system with advanced electronics, designed for specific applications instead of general-purpose use, which is expected to be a significant benefit in terms of revenue and capability. 

Through DLM, the company is looking to strengthen its position in electronic manufacturing services (EMS) by suitable acquisitions and focusing to enter the EVs segment, the brokerage firm said. The stock has achieved the brokerage firm’s target price of Rs 1,922 per share.