Shares of Siemens fell over 4 percent on Monday as brokerages give a thumbs down to its purchase of C&S Electric.
Shares of Siemens fell more than 4 percent on Monday as brokerages frowned on the industrial group's purchase of a New Delhi-based electrical equipment maker.
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Siemens purchased 99.22 percent stake in C&S Electric, which makes low-voltage switchgear parts, metering devices and other products used to transmit and distribute electricity, for Rs 2,100 crore. The stock fell as much as 4.4 percent to Rs 1,552 a share on the Bombay Stock Exchange (BSE). At 2:49 pm, the stock was trading 4 percent lower at Rs 1,559 compared with a 0.9 percent, or 375 points, fall in BSE Sensex at 41,238.
Post the acquisition, brokerage Motilal Oswal (MOSL) downgraded Siemens to 'neutral'. C&S Electric acquisition not the best use of cash and asked investors to await a better entry point in the stock, according to MOSL.
Siemens’ acquisition of C&S Electric is a reaction to the fear of losing market share in the switchgear business, especially after Schneider’s acquisition of L&T’s portfolio, the brokerage report stated.
Other analysts too took a dim view of the deal.
Phillip Capital said this acquisition takes Siemens further away from the traditional and now structurally challenged utility facing power and gas business, additionally, exposing C&S to its global franchise enhances opportunities in the Infrastructure and Industrial segments.
In FY19, C&S Electric clocked revenue of Rs 1,240 crore with EBITDA at Rs 120 crore. EBITDA margin stood at 9.5 percent and the adjusted PAT was reported at Rs 52.7 crore.
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