- 26 Apr 2022
- ICICIdirect Research
Cyient acquires 100% stake in CITEC
CYIENT - 1977 Change: -33.15 (-1.65 %)News: Cyient announced that it is acquiring 100% stake in Finland based CITEC. It will acquire the company at EV of EUR94mn ( 1.2x Price to sales). The company has capabilities in plant engineering, product engineering and Digital solutions. The industries which it caters to are Energy, Mining, Marine, Oil & gas, Pharma, Machine& equipment. 600 employees of CITEC will join as a part of the acquisition. The acquisition would be funded through cash:debt in the 50:50 ratio.
Views: The company’s growth over the years has been lackluster and it is trying to address it through this acquisition. The acquisition is expected to strengthen its presence the Europe region specially in the Nordic countries where it currently do not have any presence. It will also strengthen its capabilities in the plant engineering, product engineering space . In the near to medium term, it would bring in some incremental revenue growth and uptick in EBIT margins ( as the acquired entity is commanding better margins of 14-16% vs 13-14% for Cyient). However it is important to note that the acquired entity’s last 3 year’s financials are not very encouraging as its revenue grew by 1% CAGR so we are not sure how it will address the growth concern. Also the industries and region in which it is trying to establish presence through this acquisition, the addressable market of plant engineering in those regions/industries is growing in mid-high single digit.
Impact: Neutral