Mahindra CIE experiences a 9% surge and reaches a 52-week high following a significant block deal.

According to media reports, Mahindra & Mahindra (M&M) was planning to sell its remaining 3.2% stake in Mahindra CIE Automotive (MCIE) through a block deal on stock exchanges. Following this news, MCIE shares surged by 9% and reached a 52-week high of Rs 493.65 on the NSE. Over 15 million shares, accounting for 4% of MCIE’s total equity, were traded in a block deal on the NSE, although the identities of the buyers and sellers were not immediately disclosed.

As of the latest update, the stock was trading 3.4% higher at Rs 468.25, while the Nifty 50 index experienced a slight decline of 0.06%.

The block deal was reported to have a floor price of approximately Rs 425 per share, representing a discount of 5-6% compared to the last closing price. The total value of the transaction was estimated at around Rs 500 crore. M&M had previously sold a 6.06% stake in MCIE in March 2023 to institutional investors at Rs 357.4 per share. After this transaction, M&M’s stake in MCIE will be reduced to zero. ICICI Securities expects MCIE to participate in the deal as they have expressed interest in increasing their stake in the company if the opportunity arises, considering that MCIE has not seen any creeping acquisition-led stake increase in FY24.

This divestment is seen as positive for MCIE in the long term, as it removes the overhang of M&M repeatedly selling its stake in the company. The brokerage firm holds a positive view on MCIE due to its commitment to growing the high-margin India business and driving efficiencies in the European domain.

From M&M’s perspective, the divestment makes sense as MCIE is no longer considered a core investment. However, considering the scale of the transaction relative to M&M’s own size, it has minimal financial implications for M&M.

MCIE is involved in the production and sale of automotive components to original equipment manufacturers and other customers in India and overseas. The company operates manufacturing facilities across various locations in India and supplies automotive components to its customers domestically and internationally.

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