Shares of Cyient Ltd are in focus on Thursday morning after the appointment of Sukamal Banerjee as CEO & ED of its DET business. Banerjee has joined Cyient from Xoriant, where he was CEO for the last two years. Before Xoriant, he was with HCL Technologies Ltd for nearly 27 years in various leadership roles.
Nuvama said Banerjee comes with strong credentials and a very good pedigree. He was leading the engineering division of HCLT—biggest ERD company in India.
"We believe his appointment is a step in the right direction for Cyient—to steer the ship amid the chaos it found itself in after the resignation of the earlier CEO. We would be keenly watching out for the new CEO’s strategy, to improve the growth profile of the Cyient DET business," the brokerage said.
For now, it retained its ‘Hold’ on the stock with a target of Rs 1,660.
"The appointment comes at a time when Cyient’s (DET) business is facing demand challenges due to industry headwinds and weak order bookings on a ttm basis. The company now faces moderating demand in the aerospace segment and tepid performance in rail, while the outlook in sustainability remains bleak due to weak order bookings in the past few quarters to compensate for the ramp-down in a few large engagements. We maintain our REDUCE rating with an SoTP-based FV of Rs1,600," said Kotak Institutional Equities.
What to expect? With the guidance of 2.7 per cent YoY decline in top line in FY25, and weak exit rate likely to affect the FY26 growth, Banerjee’s task to is revive the growth and predictability of the business, Nuvama said. The brokerage would wait for his strategy presentation and for the business parameters to revive, even as the stock current valuations appear quite attractive.
"We continue to value the DET business at 20 times FY27 EPS and DLM at the current market-cap (applying a 20 per cent holdco discount)," it said.
Kotak said the initial focus would be on delivering consistent portfolio performance―the portfolio is more diversified than five years ago but also has higher exposure to project-based business, which can be managed better. It said focus would also be on improving sales efficiency—an objective evaluation based on revenue, margin and order intake, with rewards linked to incremental revenues. Besides, it expects leveraging of Cyient's technology capabilities―investments (100 bps on an annual basis) for IP have been made in the past three years, but the monetisation needs to be improved.
Step in right direction Nuvama said Banerjee would fill a void created by the departure of the earlier CEO Karthikeyan Natarajan (Karthik). Karthik had joined Cyient as COO in March 2020 and was thereafter elevated to CEO of Cyient DET in April 2023.
While under his leadership, Cyient DET significantly improved its margin profile, the growth trajectory and, particularly, its predictability, continued to elude him.
"We see the appointment of Banerjee as a step in the right direction. The company has always had a coveted clientele and strong capabilities but has a patchy record on the execution front. Given Banerjee’s experience, it would look to make amends on that," Nuvama said.
With Mr Banerjee’s appointment, Cyient is now following in the footsteps of other mid-cap companies, by appointing an experienced leader with strong pedigree to lead its ER&D business, the brokearge noted.