Cyient to Sell 14.5% Stake in Cyient DLM Via Block Deal

On August 20, 2024, IT services company Cyient announced that its board approved the sale of a 14.5% stake in its subsidiary, Cyient DLM Ltd, through a block deal. This sale is expected to be finalized on August 21, 2024, with the floor price likely set at Rs.748.65 per share, a 5% discount from Cyient DLM’s closing price of Rs.788.05.

Details of the Stake Sale

Cyient plans to sell up to 1.14 crore equity shares, representing approximately 14.5% of the total outstanding equity in Cyient DLM. The company majorly  intends to use the proceeds from the sale to meet its capital requirements and pay off debts. Specifically, Cyient has plans on key investments, including its recently announced semiconductor business and other organic and inorganic growth projects.

As of June 30, 2024, Cyient held a 66.66% stake in Cyient DLM. For FY24, Cyient DLM reported revenues of Rs.1,192 crore, contributing 17% to Cyient’s total revenue of Rs.7,147 crore. The net worth of Cyient DLM as of March 31, 2024, stood at Rs.909 crore, which is 20% of Cyient’s total net worth of Rs.4,557 crore.

Impact on Financial Performance

Cyient’s decision to divest a portion of its stake in Cyient DLM comes after a challenging first quarter, where the company reported a 0.6% decline in revenue due to delays in project execution, particularly in the railway and connectivity segments. Cyient’s management has revised its FY25 revenue growth guidance for its Digital, Engineering, and Technology (DET) segments to flat year-on-year.

Conclusion: Cyient’s decision to sell a 14.5% stake in Cyient DLM is a calculated step to further strengthen its footing amid facing challenges. This aims to free up capital for bigger investments and reduce debt, setting the stage for a potential rebound later in the year. Investors responded positively, pushing Cyient’s shares up by more than 6%, indicating faith in the company’s long-term plans.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.