Cyient - Rangsons’ Acquisition to Strengthen Systems Capability :: Edelweiss, link

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Cyient today announced the acquisition of majority stake (74%) in Rangsons Electronics (Rangsons) in an all-cash deal. Rangsons, headquartered in Mysore (India), is an electronics system design and manufacturing (ESDM) services company with revenue of USD66mn (FY14) and EBITDA margin of 10-12%. No disclosure has been made on the consideration paid. Cyient has the option to acquire the balance 26% over the next 2-4 years. The company had earlier articulated strategy of moving towards higher contribution from systems and solutions, and this acquisition is a step in that direction-Rangsons earns ~81% revenue from system integration and augments Cyient’s capabilities across product lifecycle services. We have not built in the impact of the acquisition as we await Q3FY15 numbers.

Augments Cyient’s systems and solutions capabilities

Rangsons, with its system integration and product life cycle services, augments Cyient’s portfolio and is in line with the latter’s strategy of enhancing contribution from systems and solutions. While no financial disclosures have been made, Cyient with INR7.4bn cash mentioned that it can fund the acquisition via internal funds, and debt, if taken, will be to optimise the capital structure. The company expects the transaction to be EPS accretive and RoE to improve by more than 0.5% in FY16E.

About Rangsons Electronics

With an employee base of 1,000 plus, Rangsons provides ESDM, integration and manufacturing services and caters to verticals like aerospace & defense (69% revenue), industrials (18% revenue) and medical (11% revenue) and has presence in West Asia (70%) and North America (27%). Its FY14 revenue stands at USD66mn and EBITDA margin was in the 10-12% range. Top-5 clients contribute 85% to revenue.

LINK

https://www.edelweiss.in/research/EdelFlash-Cyient--Rangsons%E2%80%99-Acquisition-to-Strengthen-Systems-Capability/27944.html