Promoter Cyient Ltd on Wednesday sold a partial stake in its listed subsidiary DLM Scientific In a massive deal, Cyient has sold around 1.14 million shares or 14.5% of the stake in the company, according to stock exchange data.
The transaction was done at Rs 764.4 crore apiece, valuing the deal at Rs 879 crore.
Reference funds include Morgan Stanley, HDFC Mutual Fund, Edelweiss MF, Nippon India MF and Citigroup, among others, which have acquired stakes in the transaction.
As of June 2024, Cyient held approximately 66.66% of the company’s shares as promoter. The remaining 33.34% is held by public shareholders. Among the public holdings, mutual funds hold approximately 17% of the shares while foreign portfolio investors hold 4.88% in Cyient DLM. Cyient said the revenue from the sale of shares will be used for investment in the semiconductor business and debt repayment. The company hopes to expand the addressable market by offering turnkey assets to clients in the medical, industrial and telecommunications sectors. So far this year, Cyient shares have underperformed, with a negative return of 13%, while Cyient DLM shares have seen a steady growth of 15% so far this year.
Kotak Securities believes the investment opportunity in Cyient looks attractive, albeit with some risks.
“Success would come down to software choice and ability to leverage IP to minimise custom chip design timelines. Maintain BUY rating and fair value unchanged at 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 and says it does not expect promoter stake in DML to fall below 51%.
Cyient had recently established a wholly-owned subsidiary to focus on turnkey application-specific integrated circuit (ASIC) design and chip sales through a fabless model for mixed-signal analog chips.
“The company has higher working capital needs given the end-to-end liability that Cyient assumes and the revenue recognition from the sale of chips to customers. The architecture development and design phases would have significantly higher margins than the manufacturing portion of the contract,” Kotak said.
(Disclaimer: The recommendations, suggestions, views and opinions of the experts are their own and do not represent the views of the Economic Times)
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