Mahindra CIE tanks 9 percent after block deal of 6.2 percent equity

Shares of Mahindra CIE Automotive (MCIE) dipped 9 per cent to Rs 357 on the BSE in Monday’s intra-day trade on profit booking after over 6 per cent of the total equity of auto components & equipments changed hands via block deal.

At 09:15 AM; around 23.63 million equity share representing 6.23 per cent of total equity of MCIE changed hands via block deal, the BSE data shows. The names of the buyers and sellers were not ascertained immediately.

As per media sources, Mahindra & Mahindra (M&M), one of the promoters of MCIE, was looking to sell 4.6 per cent stake in the company via block deal mechanism on stock exchanges on Monday.

Media reports indicated that the floor price for the deal could be around Rs 355/ share (i.e. a discount of 10 per cent to last closing price) with total transaction value pegged at around Rs 620 crore. This follows sale of 2.17 per cent stake by M&M in the company in September 2022 to CIE group at Rs 285/ share.

As on December 31, 2022, M&M held 35.1 million shares or 9.25 per cent stake in MCIE, the shareholding pattern data shows.

At 10:48 AM; MCIE quoted 5 per cent lower at Rs 375.15, as compared to 0.17 per cent rise in the S&P BSE Sensex. Despite of today’s decline, in past three months, the stock has rallied 30 per cent, as against 5 per cent fall in the benchmark index. It had hit a record high of Rs 462 on February 24, 2023.

In past one year, the stock price of MCIE has more-than-doubled or zoomed 110 per cent. In comparison, the Sensex has gained 7 per cent during this period.

Participaciones Internacionales Autometal, DOS S.L (PIA2) or CIE, one of the promoters of MCIE increased stake in the company from 60.76 per cent to 65.71 per cent, for the third consecutive year, in December 2022. The company’s board approved name change of MCIE to CIE Automotive India Limited (CAIL).

Meanwhile, in October-December quarter (Q4CY22), MCIE’s India business outperformed the European business, driven by strong domestic demand, while Europe demand showed signs of improvement, on the back of cost pass through and easing chip shortages. Given the moderation in commodity costs and partial pass-through of energy costs, Motilal Oswal Financial Services expect margins in both geographies to improve from here on.

MCIE’s growth story is on track, driven by its organic initiatives (new products and customers in the India business). This, coupled with cost-cutting measures in both India and the EU, is expected to drive margin expansion going forward. Any significant order wins or growth in the EV portfolio can drive a re-rating on the stock, the brokerage firm said in result update.