Cyient Shares Surge 3% On Plans To Offload Stake In Unit Via Block Deal

Multinational tech firm Cyient said it will sell up to 14.5% stake in its subsidiary, Cyient DLM, through block deals on Wednesday.

What Happened: The company informed the stock exchanges on Tuesday after market close that its board had approved the proposal to sell up 1.14 crore shares, which equates to a 14.5% stake in Cyient DLM, in a block deal on Wednesday.

Cyient had 66.66% stake in Cyient DLM as per the latest shareholding data. The stake sale will reduce its holding in the unit to 52.16%. 

Cyient said the proceeds from the transaction will be used for company's capital investments, including its recently announced semi conductor business and repayments of the debt of the company. 

In FY24, Cyient DLM posted a revenue of ₹1,191.9 crore, while Cyient had a revenue of ₹7,147.2 crore, indicating that Cyient DLM contributed 17% to Cyient's revenue in FY24. 

See Also: NHPC’s Defunct Teesta Dam Power Station In Sikkim Ravaged By Massive Landslide

Brokerage Views: JP Morgan maintained an "overweight" call on Cyient with a target price of ₹2,100. The brokerage said the proceeds would be used for mergers and acquisitions (M&A) and debt repayment.

The M&A could be in semi conductors or in auto, the brokerage said. The research firm also expects the company to not reduce its shareholding in Cyient DLM below 51%. The company's DET business had a debt of around $47 million (₹394 crore) at June 2024 quarter and the stake sale will used for partial repayment of debt, according to the research firm.

Kotak Institutional Equities also maintained “buy” call with a target price of ₹2,050, saying the business opportunity is attractive but does have a few risks. The brokerage added that the company should invest in developing stronger intellectual property (organic or inorganic) and develop strong risk assessment practices to evaluate engagements.

Price Action: Shares of Cyient were up 3.53% to ₹2,003.05 on Wednesday morning.

Read Next: S&P Global Ratings Upgrades Tata Power’s Credit Rating