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Acquisition to boost Cyient’s MRO, aftermarket capabilities

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The acquisition of Singapore-based Global Services Engineering Asia from Pratt & Whitney (P&W) will strengthens the Indian IT provider’s aftermarket capabilities in the aerospace segment, analysts said.

Global Services has been catering to P&W’s MRO (maintenance, repair and overhaul) requirements in the region. Global Services currently has a revenue base of USD10-12mn with EBITDA margin in the 12-14% range.

“Cyient has been in the design engineering services segment and had recently acquired Rangsons to augment its design-led manufacturing capability. The current acquisition extends its capabilities in the aftermarket and MRO space. While the acquisition does not provide meaningful upside to our estimates, we believe it to be strategic and benefits will accrue in the long term,” Edelweiss said.

Global Services, owing to its exposure in aftermarket capabilities, aligns with Cyient’s aerospace strategy and focus on MRO services and is line with the latter’s strategy of enhancing contribution from systems and solutions, it added.

The deal is an asset purchase transaction with transfer of ~90 employees. P&W has committed volumes for a period of 4 years.

The business will see additional growth from new clients over medium to long term and will be financed via 1:1 debt equity.

Headquartered in Singapore, GESA was established in 2005 and has ~90 repair and development engineers with revenue base of USD10-12mn and EBITDA margin of 12-14%.

It caters to MRO requirements (USD67bn market size expected to be USD100bn over FY15-25) in the aerospace segment.

While the acquisition does not lend material upside to our estimates, we believe it is a step in the right direction and in line with Cyient’s long-term strategy of achieving higher proportion of revenues from systems and solutions.

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