Mahindra CIE gains 8% after huge block deal

Shares of Mahindra CIE Automotive Ltd rose over 8% on Wednesday following a massive block sale as around 12.2 million shares, or 3.2% of the business, changed hands in a series of exchanges, according to Bloomberg. However, the true identities of the buyers and the sellers were unknown.

The Mahindra CIE shares reached a high of Rs 493 per share. The stock was trading at Rs 476 on the BSE at 9.30 a.m., up 5% from the previous close, while India's benchmark Sensex slid 0.3 percent to 61,794 points. Meanwhile, M&M's stock dropped 0.3% to Rs 1,265 per share.

Mahindra & Mahindra is planning to sell a 3.2% interest, or 1.2 crore shares, in automotive component supplier Mahindra CIE Automotive Ltd in a block deal soon. M&M's share in the firm will be reduced to zero as a result of this transaction.

The sale is believed to be at a 5-6 % discount to the current market price (CMP). On the BSE, Mahindra CIE shares closed 0.40 percent higher at Rs 453.20 apiece on Tuesday, compared to the previous close.

Because CIE Automotive did not incur any creeping acquisition-led stake increase in this fiscal year FY24, we anticipate them to take part because they have been vocal about expanding their stake in the company if a chance comes. In the long run, this is good for the stock since it reduces the risk of M&M selling its ownership in the company repeatedly. We have a bullish view of the firm based on its commitment to building a high-margin Indian business and driving efficiency in the European sector. From M&M's standpoint, it was no more a fundamental investment, therefore divestiture makes sense. However, considering the extent of the deal in comparison to M&M's scale, it has small financial effects. ICICIdirect stated in a note.

Mahindra & Mahindra has already offloaded a 6.05-percent equity stake in Mahindra CIE Automotive through a block deal in March. The company sold shares at a gross price of Rs 357.39 per unit, representing a nearly 11% reduction from the previous close. Following the sale, Mahindra & Mahindra's stake in Mahindra CIE Automotive fell from 9.25% to 3.19%.

Mahindra CIE reported a combined net loss of Rs 657.8 crore for the quarter ending December 2022. The previous year, the company posted a total net profit of Rs 80.2 crore. Revenue from operations grew to Rs 2,246.8 crore in the current quarter, up from Rs 1,669.2 crore in the previous year's September-December period