Cyient DLM IPO sails through on day 1; retail portion booked 4.5x

The Rs 592 crore-initial public offering (IPO) of Cyient DLM saw a strong demand from the investors during the first day of the bidding process. The issue sailed through in little more than three-hours of day 1, led by frenzy among the retail investors.

Cyient DLM is selling its shares in the price band of Rs 250-265 apiece with a lot size of 56 equity shares. Three-day stake sale of up to 2,23,39, 623 fresh equity shares will conclude on Friday, June 30. Incorporated in 1993, Cyient DLM provides electronic manufacturing services (EMS)  including product design, and flexible manufacturing services.

According to the data from the BSE, the investors made bids for 1,42,92,488 equity shares, or 1.07 times, compared to the 1,33,32,297 equity shares offered for the subscription by 1.15 pm on Tuesday, June 27, 2023.

The quota for retail investors was booked 4.46 times whereas the allocation for non-institutional bidders fetched 1.10 times bids. The portion for qualified institutional bidders was booked merely one per cent, while the allocations for employees was subscribed only 15 per cent.

The company also undertook a pre-IPO placement of 40,75,471 equity shares to Amansa Investments at a price of Rs 265 apiece amounting to Rs 108 crore. Cyient DLM mopped up Rs 259.64 crore by allocation of 97,98,113 shares at an issue price of Rs 265 apiece to 20 anchor investors including Societe Generale, Catamaran Ekam, BNP Paribas and various mutual funds.

The issue has majorly garnered positive rating from the analysts who have suggested subscribing to the issue citing niche business sector, strong growth outlook and sound promoter background. However, a few have flagged muted margins, dropping profits and dependence on key clients as the biggest concerns.

"Over FY 21-23 period, Cyient DLM’s revenue growth is lagging peers at 15 per cent CAGR, however its strong order book provides decent visibility of accelerated growth going forward. Its valuation on P/E basis is reasonable compared to peers, at 66.2x FY23 earnings, considering the future growth opportunities," said Nirmal Bang Equities with a 'subscribe for long term' tag.

"We like Company’s manufacturing infrastructure, stringent quality, diverse in-house capabilities and robust supply chain as it enables company to provide high quality end-to-end integrated solutions to its customers. With strong parentage of Cyient, and a long history of industry expertise, an experienced Board and senior management team, company is well poised to cater opportunities present in sector," said Hem Securities with a subscribe tag.

For the year ended on March 31, 2023, Cyient DLM clocked a net profit at Rs 31.73 crore with a total revenue at Rs 838.34 crore. The company's net profit stood at Rs 39.80 crore with a total revenue at Rs 728.48 crore.

Cyient DLM has a strong order book of Rs 2,432.5 crore and a long-standing business relationship with customers shows business visibility going forward. The current EBITDA margins are around 10%-11% and margins are expected to be the same going forward. The company intends to expand its geographical footprint, particularly in North America, said Arihant Capital.

The company focused on exploring opportunities in OSAT services, with such diversification and augmentation to improve the profitability by enhancing margins, and significantly increase the visibility of the brand. At the upper band of INR 265, the issue is valued at a PE of 34.2x based on FY23 EPS, it added with a 'subscribe for listing gains' rating.

Axis Capital and JM Financial are the book-running lead managers to the issue, while KFin Technologies has been appointed as the registrar to the issue. Shares of Cyient DLM will be listed on both BSE and NSE.


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