Lately, subscribing for IPOs has been a rewarding decision for the investors. The upward trend Indian markets have forced potential IPO candidates to reach the primary market and get bumper listings. No doubt, the recent IPO’s have been rewarded handsome despite their demand of rich-valuations. Promoters of these companies have bagged multi-fold returns through Offer for Sale. Considering, the continuation of upward rally in the markets and outperforming metal sector, Shyam Metalics has decided to enter into the listed market.
The issue size is a mix of fresh issue of Rs. 657 crores and offer for sale of Rs. 252 crore by Subham Capital Private Ltd, Subham Buildwell Private Ltd, Kalpataru Housefin & Trading Private Ltd, Dorite Tracon Private Ltd and Narantak Dealcomm Ltd. According to Draft Red Herring Prospectus, the issue comprises of Rs. 657 crores to be raised from issuance of fresh equity will be utilized for repayment and/or pre-payment of company and its subsidiary (SSPL)’s debt fully or partially while the rest will be utilized general corporate purpose.
Shyam Metalics and Energy Ltd. IPO Details:
- Issuer Company: Shyam Metalics.
- Industry: Metals
- IPO Size: 909 cr.
- Price Band: 303-306
- Issue Open Date: 14 June, 21
- Issue Close Date: 16 June, 21
- Listing Date: 24 June, 21
- Minimum Lot Size: 45 shares
- Employee Discount: 15 Rs. Per share
- Face Value: 10 Rs. Per share
- Retail Allocation: 35%
- Listing Exchange: NSE, BSE
About the Company
Kolkata- based India’s one of largest producer of ferro alloys in terms of installed capacity was incorporated in 2002. Shyam Metalics and Energy Limited (SMEL) is India’s leading integrated metal producer company. It is primarily engaged in the pellets, sponge iron, steel billets, TMT, structural products, wire rods, and ferro alloys. In the sponge iron segment, Shyam Metalics is the fourth-largest player in India. The firm has 3 manufacturing plants located in Sambalpur in Odisha, and Jamuria and Mangalpur in West Bengal. As of Dec 31, 2020, its manufacturing units have an aggregated installed metal capacity of 5.71 million tonnes per annum. The company is looking to expand its capacity from 5.71 MTPA to 11.60 NTPA by 2025.
The company is serving Jindal Stainless Limited, Rimjhim Ispat Limit and other heavy industries while the global clients of the company are Norecom DMCC, Norecom Limited, POSCO International Corporation, World Metals & Alloys, Traxys North America LLC, JM GLobal Resources, Vijayshri Steel Pvt Ltd, etc
Industry Growth Drivers
Metal stocks have gained a lot of traction this year after the prices shoot higher like there is no tomorrow. From large-cap to penny, the whole basket of metal stocks has outperformed the other indices. The rising demand of infrastructure and civil engineering will keep the demand of the base metals intact. The automobile sector is gaining strength again and being the leading producer of ferro-alloys, the company will reap the benefits.
Financials
On the financial front, the company had reported a net profit of 340.3 crores for the year ending 2020. The company has a small amount of Rs. 351.3 crores in the form of non-current liability is occupied in balance sheet. Company has been consistently showing a rise in the cash flows despite low debt. Metal companies are expected to be highly leveraged but a low-leveraged metal company deserves good premium. Revenues from the direct operations of the company have fallen a little while the net profits of the company have plunged sharply. Considering the upper price band, the company is demanding a P/E multiple of 21x, higher than the Industry P/E of 14.55. However, the low-leverage capital structure of the company deserves a little more premium valuation.
Book Runners
ICICI Securities, Axis Capital, IIFL Securities, JM Financial and SBI Capital Markets are the book running lead managers to the issue.