Promoter Cyient Ltd on Wednesday sold some shares in its listed subsidiary Cyient DLM in a lump sum.According to exchange data, Cyient sold about 114 million shares, or 14.5% stake in the company.
The transaction was done at Rs 764.4 per share, bringing the total transaction value to Rs 8.79 billion.
Well-known funds like Morgan Stanley, HDFC Mutual Fund, Edelweiss MF, Nippon India MF and Citigroup invested in the deal.
As of June 2024, Cyient holds around 66.66% of the company’s shares as promoter. The remaining 33.34% is held by public shareholders. Of the public holdings, mutual funds hold around 17% stake, while foreign portfolio investors hold 4.88% of Cyient DLM. Cyient said the proceeds from the stake sale will be utilised to invest in its semiconductor business and repay debt. The company wants to provide turnkey assets to clients in the healthcare, industrial and telecommunications sectors, expanding its addressable market. So far this year, Cyient’s shares have languished with a negative 13% return, while Cyient DLM has posted a steady growth of 15% year-to-date.
Brokerage firm Kotak Securities believes the investment opportunity in Cyient is attractive, despite some risks.
“The key to success will be program selection and ability to leverage IP to minimize design time for custom chips. We maintain our buy recommendation and fair price remains unchanged at Rs 2,050,” the company said in the report.
JP Morgan also maintained its overweight rating on the stock with a target price of Rs 2,100 and does not expect promoters’ DML holding to fall below 51%.
Cyient recently established a wholly owned subsidiary that will focus on turnkey application-specific integrated circuit (ASIC) design and chip sales through a fabless model for analog mixed-signal chips.
“This business requires higher working capital given that Cyient will assume end-to-end responsibility and recognise revenue on sale of chips to customers. The architecture development and design phase has significantly higher margins than the fab portion of the deal,” Kotak said.
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