Cyient is making a significant move to enhance its presence in the power ICs market for Edge AI and high-performance computing. The company's subsidiary, Cyient Semiconductors, has signed a definitive agreement to acquire a majority stake in Kinetic Technologies, a leader in power management and high-performance analog and mixed-signal ICs.
About the Acquisition
The acquisition is valued at $93 million, which is approximately 3 times the price-to-sales ratio for CY24. This deal is expected to be EBIT-accretive from FY27 and EPS-accretive from FY28, meaning it will positively impact Cyient's earnings and profitability. The transaction will give Cyient full control over Kinetic Technologies by the end of four years.
Benefits of the Acquisition
The acquisition aims to help Cyient build India's first ASIC-led custom power semiconductor company. This deal is set to more than double Cyient Semicon's revenue, with Kinetic's EBITDAM expected to log above the typical services margin over the medium term. The key benefits of this acquisition include:
- Enhanced presence in power ICs for Edge AI and high-performance computing
- Increased revenue for Cyient Semicon
- Improved profitability with EBIT-accretive and EPS-accretive benefits
Investment Outlook
While the acquisition is expected to have a positive impact on Cyient's financials, the current recommendation is to reduce holdings, with a target price of Rs1,150. The views on this investment are subject to change pending deal closure and further analysis.
Remember, this is a perspective on the market, not a prediction. It's essential to do your own research and consider certified experts' advice before making any investment decisions.