Cyient takes full control of Rangsons Electronics

/ January 25, 2019/ Cyient, M&A (large, with revenues above $50m)

Cyient has acquired the remaining 26% in Rangsons Electronics it did know own, for ~USD 60m. The name Rangsons Electronics may not ring a bell, as Cyient now reports the business under the name DLM.

It it fair to say that the 2015 acquisition of Rangsons has been more difficult than planned. The business declined and so did its profitability. More here about DLM’s initial difficulties.

Cyient has partly solved the difficulties of DLM: DLM has become a high-growth business with CC/CS revenue growth of 20%. DLM is now a USD 84m business that is back to growth with Cyient continuing to invest in the business, notably through M&As.

Cyient’s next challenge for DLM is to increase its adjusted EBIT margin which has oscillated in the past three quarters in the 4.0%-4.5%. The financial recovery will take further time. Still, the management of Cyient seems to know what is doing and where it is going.

Cyient has an usual strategy in the industry with its S3 model. The company has moved into small series manufacturing, an usual move in the industry, where ER&D vendors tend to say on the service side and to a lower extent in the software product side.

With DLM, Cyient has shown that expanding from a service– and IP-centric strategy requires time to master the business model of small series manufacturing.

One of the vendors that do this very well, is Ricardo, in the U.K., with the engines it builds for luxury and Formula One vehicles firm McLaren. One of the vendors that have gone through bankruptcy for going on the manufacturing side is Pininfarina, a legendary brand, now owned by Mahindra & Mahindra/Tech Mahindra.