Promoter Cyient Ltd on Wednesday sold a partial stake in its listed subsidiary Cyient DLM through bulk deal. According to exchange data, Cyient has offloaded about 1.14 crore shares or 14.5% stake in the company.
The transaction was done at Rs 764.4 apiece, valuing the deal at Rs 879 crore.
Marquee funds including Morgan Stanley, HDFC Mutual Fund, Edelweiss MF, Nippon India MF, Citigroup among others picked up stake in the transaction.
As of June 2024, Cyient had held about 66.66% stake in the company as a promoter. The rest of 33.34% is held by the public shareholders.Among the public holdings, mutual funds own about 17% stake, while foreign portfolio investors have 4.88% in Cyient DLM.Cyient said the proceeds from the stake sale will be utilized for investment in the semiconductor business and debt repayment. The company hopes to expand the addressable market offering turnkey assets to clients in the medical, industrial and telecom industries.So far this year, shares of Cyient have been underperforming with negative 13% returns, while that of Cyient DLM witnessed steady growth at 15% year-to-date.
Brokerage Kotak Securities believes the opportunity of investing in Cyient looks attractive, albeit with a few risks.
“Success would boil down to a choice of programs and the ability to leverage IP to minimize custom chip design timelines. Maintain BUY and unchanged fair value of Rs 2,050,” it said in a report.
JP Morgan has also maintained an overweight rating on the stock with a target price of Rs 2,100 saying that it doesn’t expect promoter holding to go down in DML below 51%.
Cyient had recently established a wholly owned subsidiary to focus on a turnkey application-specific integrated circuit (ASIC) design and chip sales through a fabless model for analog mixed-signal chips.
“The business has higher working capital requirements, given end-to-end responsibility being taken up by Cyient and revenue recognition on the sale of chips to clients. The architecture development and design phases would have significantly higher margins than the fab part of the engagement,” Kotak said.
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