Mahindra CIE gains 8% after huge block deal

On May 23, CNBC TV reported that Mahindra & Mahindra is likely to sell a 3.2-percent stake, or 1.2 crore shares, in the automotive component supplier Mahindra CIE Automotive Ltd via a block deal soon.

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Shares of Mahindra CIE Automotive Ltd surged nearly 8% on Wednesday after a huge block deal, in which around 12.2 million shares or 3.2% stake of the company changed hands in buch of trades, Bloomberg reported. However details of the buyers and sellers were not known.

Mahindra CIE stock hit a high of Rs 493 a share. At 9.30am, the stock was trading at Rs 476 on BSE, up 5 percent from previous close while India’s benchmark Sensex fell 0.3 percent to 61,794 points. Meanwhile, M&M stock fell 0.3% to Rs 1,265 a share.

On  May 23, CNBC TV reported that Mahindra & Mahindra is likely to sell a 3.2-percent stake, or 1.2 crore shares, in the automotive component supplier Mahindra CIE Automotive Ltd via a block deal soon. Post this transaction, M&M’s stake in the company will stand reduced to Nil.

The deal is expected to be at a discount of 5-6 percent to the current market price (CMP). Shares of Mahindra CIE closed 0.40 percent higher at Rs 453.20 apiece on the BSE on Tuesday, compared to the previous closing.

Divestment

“Since CIE automotive has not incurred any creeping acquisition led stake increase in this financial year (FY24), we expect them to participate given that they have been vocal on increasing their stake in the company if opportunity arrives. In the long term this is positive for the stock as it removes the overhang of M&M selling stake in the company time and again. Given the commitment to grow high margin India business and drive efficiencies in the European domain, we hold a positive view on the company. From M&M’s perspective this was no longer a core investment and hence divestment of the same makes sense. However, given the magnitude of its transaction vs. its own scale, it has minimal financial implications for M&M,” said ICICIdirect in a note.

In March, Mahindra & Mahindra had already offloaded a 6.05-percent equity representing 2,28,80,000 shares in Mahindra CIE Automotive through a block deal. The company sold shares at a gross price of Rs 357.39 per unit, which was nearly an 11% discount over the last close. Following the sale, the shareholding of Mahindra & Mahindra in Mahindra CIE Automotive decreased from 9.25% to 3.19%.

For the quarter ended December 2022, Mahindra CIE posted a consolidated net loss of Rs 657.8 crore. In the year-ago period, the company had reported a consolidated net profit of Rs 80.2 crore. Revenue from operations increased to Rs 2,246.8 crore for the quarter under review, compared to Rs 1,669.2 crore in the September-December period of the previous year.