Mahindra CIE surges 9%, hits 52-week high after large block deal

As per media sources, M&M was looking to sell its residual 3.2% stake in MCIE via the block deal mechanism on stock exchanges today

Shares of Mahindra CIE Automotive (MCIE) rallied 9 per cent to hit a 52-week high of Rs 493.65 on the National Stock Exchange (NSE) in Wednesday’s intra-day trade after over 15 million equity shares of the company changed hands via a block deal.

Till 09:45 am; around 15.39 million shares, representing 4 per cent of total equity of MCIE, changed hands via block deal on the NSE, the exchange data shows. The names of the buyers and sellers were not ascertained immediately.

Currently, the stock was quoting 3.4 per cent higher at Rs 468.25, as compared to a 0.06 per cent decline in the Nifty 50.

As per media sources, Mahindra & Mahindra (M&M) was looking to sell its residual 3.2 per cent stake in MCIE via block deal mechanism on stock exchanges today.

The indicated floor price for the deal was at around Rs 425 per share (i.e. a discount of 5-6 per cent to last closing price) with total transaction value pegged at around Rs 500 crore. This follows sale of 6.06 per cent stake by M&M in the company in March 2023 to institutional investors at Rs 357.4/share.

Post this transaction, M&M’s stake in the company will stand reduced to nil. Since MCIE has not incurred any creeping acquisition led stake increase in this financial year (FY24), ICICI Securities expects the firm to participate given that they have been vocal on increasing their stake in the company if the opportunity arrives.

In the long term this is positive for the stock as it removes the overhang of M&M selling stake in the company time and again. Given the commitment to grow high margin India business and drive efficiencies in European domain, the brokerage held a positive view on the company.

From M&M’s perspective this was no longer a core investment and hence divestment of the same makes sense, however, given the magnitude of its transaction vs its own scale, it has minimal financial implications for M&M, it added.

MCIE is engaged in the business of production and sale of automotive components to original equipment manufacturers and other customers (including leading suppliers of components) in India and overseas. The company has manufacturing facilities in various locations across the country in India. MCIE has an established presence in each of these locations and supplies automotive components to its customers based there and exports products to customers based in other countries as well.