- 03 Oct 2022
- ICICIdirect Research
Cyient evaluating part divestment/IPO/spin-off DLM businessCYIENT - 944 Change: -0.85 (-0.09 %)
Cyient has informed the stock exchanges that the board of directors in its meeting on September 30, has approved forming a sub-committee to evaluate Cyient’s strategy, going ahead. The sub-committee would consist of three independent directors and will evaluate options on part divestment as well as IPO, spin off or partnership with a strategic investor for its DLM business.
The DLM business contributes 17% of revenue for Cyient and grew at 14% CAGR over the last five years. The growth in the last few quarters has been challenging due to supply side constraints while the EBIT margin profile is also on the lower side for this business (7.2% EBIT margin in FY22 vs 15.3% for IT services EBIT margin). We believe that divestment of the business is expected to improve margin profile of the company, if fructifies. Cyient’s recent acquisition also suggests that it is looking for consulting led growth approach, going forward, and divestment of this business could be a step in the right direction.