Shyam Metalics IPO: All You Need To Know
Shyam Metalics will sell shares at Rs 303-306 apiece in its three-day IPO, its second attempt to tap the primary market.
Shyam Metalics Ltd. will sell shares at Rs 303-306 apiece in its three-day initial public offering starting on June 14, its second attempt to tap the primary market.
The proposed Rs 909 crore initial public offering that will close on June 16, comprises of a fresh issue worth Rs 657 crore and an offer-for-sale of up to Rs 252 crore, according to its red herring prospectus. The integrated metal producer plans to use the proceeds from the fresh issue to repayment of the Rs 450 crore debt and for general corporate purposes.
Key Details
- Fresh issue: Aggregating up to Rs 657 crore.
- Offer for sale: Rs 252 crore.
- Minimum bid size: 45 shares
- Price band: Rs 303-306
- Listing: NSE and BSE.
- Book running lead managers: ICICI Securities, JM Financial, Axis Capital, IIFL Securities and SBI Capital Markets.
Business:
Shyam Metalics and Energy is an integrated metal producing company based in India with a focus on long steel products and ferroalloys. It is amongst the largest producers of ferroalloys in terms of installed capacity in India, as of February 2021.
The company currently operates three manufacturing plants that are located at Sambalpur in Odisha, and Jamuria and Mangalpur in West Bengal.
As of December 31, 2020, the aggregate installed metal capacity of its manufacturing plants was 5.71 million tonnes per annum (MTPA). Its manufacturing plants also include captive power plants with an aggregate installed capacity of 227 MW.
The company said it is in the process of increasing the capacities of existing manufacturing plants and captive power plants, to 11.60 MTPA and 357 MW respectively.
These proposed expansions are expected to become operational between FY22 and FY25. In addition, it is in the process of commissioning an aluminium foil rolling mill at Pakuria in West Bengal with a proposed installed capacity of 0.04 MTPA, which is expected to become operational in FY22.
Strengths:
Shyam Metalics has a diverse product mix that helps mitigate demand volatility and cost pressures.
The steelmaker's manufacturing plants in Odisha and West Bengal are near the mineral-rich belt of iron ore, manganese ore, chrome ore, and coal. It also has long-term linkages for coal as well as chrome ore with Mahanadi Coal Field and Odisha Mining Corporation respectively.
It has managed to deliver strong financial performance compared to its peers.
Besides that, Shyam Metalics has a better leverage position compared to its peers largely on account of steady cash accruals following the healthy operational performance. This helped the company reduce its debt consistently to Rs 410 crore as of March 2020, from an elevated level of approximately Rs 600 crore around six years ago.
Risks:
The company’s manufacturing plants and sources of raw materials are primarily concentrated in eastern India. Therefore, any adverse developments affecting this region could hurt its business, results of operations and financial condition.
It does not have any long-term contracts for the supply of raw materials and clients.
There is no assurance that its plans to expand into the manufacturing and sale of pig iron, ductile pipes and aluminium foil will be successful due to lack of experience.
Financials
Shyam Metalics has reported healthy operational as well as financial growth despite downturns in the industry. Its revenue from operations increased at a CAGR of 6% from Rs 3,920 crore in FY18 to Rs 4,395 crore in FY20 and was Rs 3,996 crore for the nine months ended Dec. 31, 2021.
It reported an Ebitda, or earnings before interest, taxes, depreciation, and amortisation, of Rs 634.05 crore and Rs 717.32 crore in FY20 and the nine months ended Dec. 31, 2020, respectively.
Shyam Metalics as compared to peers has reasonable EPS and the highest return on net worth, as per March 31, 2021 financials