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Shyam Metalics IPO (Shyam Metalics and Energy Ltd. IPO) from the integrated metal producing company is planning to raise up to Rs. 909cr through an IPO. Shyam Metalics IPO opens on 14th Jun. and closes on 16th Jun. 2021 and is being offred in the price band of Rs. 303 – 306 per share. It is after many years that a metal producer is coming with an IPO.

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Shyam Metalics IPO Details:

Issue Period	Monday, 14 June – 16 June, 2021*
Anchor Portion	44358
Issue Details	Fresh Issue of Equity Sharesupto ₹ 657 Cr + Offer for Sale C9upto ₹ 252 Cr
Issue Size (Shares)	~ 29,705,882 Equity Shares
Issue Size (₹ Cr)	₹ 909 Cr
Price Band	₹ 303 – 306
Bid Lot	45 Shares
QIB	50% of the net offer
NIB	15% of the net offer
Retail	35% of the net offer (~ 1,0292,059 Shares, ₹ 315 Cr)
Retail Appls for 1x	2.29 Lacs
BRLMs	Axis Capital, ICICI Securities, IIFL Securities, JM Financial, SBI Capital Markets
Registrar	KFin Technologies Pvt. Ltd.

Updates :

• ANCHOR ISSUE: Ahead of its IPO, Shyam Metalics garnered Rs 269.94 crore from 22 anchor investors. These include Edelweiss Alternative Investment Opportunities Trust, Abakkus Growth Fund, Aditya Birla Sun Life, Kotak MF, Integrated Core Strategies, SBI General Insurance, Aurigin Master Fund, IIFL Asset Management, Kuber India Fund, Elara India Opportunities Fund, Nippon Life, Dovetail India Fund, L&T MF, Saint Capital Fund, GAM Multistock etc.

About Shyam Metalics (Shyam Metalics and Energy Ltd.)

• Shyam Metalics is a Kolkata based manufacturer of long steel products and ferro alloys.
• Shyam Metalics and Energy Limited was incorporated on December 10, 2002.
• Shyam Metalics primarily produces intermediate and long steel products, such as, iron pellets, sponge iron, steel billets, TMT, structural products, wire rods, and ferro alloys products with a specific focus on high margin products, such as, customized billets and specialized ferro alloys for special steel applications.
• Shyam Metalics is amongst the largest producers of ferro alloys in terms of installed capacity in India.
• 2021. As of March 31, 2020, they were one of the leading players in terms of pellet capacity and the 4th largest player in the sponge iron industry in terms of sponge iron capacity in India.
• The company has 3 manufacturing units with aggregate operating capacity of 5.70 MTPA with 227 MW of Captive Power Plant. Its plants are located at Sambalpur in Odisha, and Jamuria and Mangalpur in West Bengal. As of December 31, 2020, they had partnerships with 42 distributors, who stock and sell their finished products across 13 states and 1 union territory.
• As of December 2020, it had an aggregate installed capacity of 5.71 million ton per annum. It also has captive power plants with total installed capacity of 227 MW.

Shyam Metalics IPO: Financials

Item /  (₹ In Cr)	9mFY21	9mFY20	FY20	FY19	FY18
Revenue from Operations	3,933.08	3,283.09	4,362.89	4,606.40	3,842.57
Revenue Growth (%)	19.80%	–	-5.29%	19.88%	–
EBITDA	717.32	448.12	634.05	956.78	714.87
EBITDA (%)	18.18%	13.61%	14.49%	20.64%	18.97%
Profit Before Tax	506.26	222.1	295.46	763.9	517.39
Net Profit	456.32	260.36	340.33	636.78	528.04
Net Profit (% )	11.60%	7.93%	7.80%	13.82%	13.74%
Equity Share Capital	233.61	233.61	233.61	233.61	46.72
Reserves	3,051.67	2,513.05	2,592.37	2,256.05	1,807.27
Net worth	3,285.28	2,746.66	2,825.98	2,489.66	1,853.99
Long Term Borrowings	182.62	354.78	351.31	213.28	201.72
Short Term Borrowings	682.3	617.79	921.13	442.77	278.66
RoNW (%)	13.89	9.49%	12.04	24.27	22.89~
NAV(₹ )~	140.63	117.57	120.97	106.57	79.36~
ROCE	13.30%	–	9.49%	24.69%	19.58%
Debt to Equity Ratio	0.27	–	0.47	0.29	0.3
FV	10
EPS (₹ )	19.53	11.15	14.57	25.86	18.17~
Equity Post IPO	255.08
IPO Price	306
EPS (Post IPO) FY20	13.34
PE	22.93
EPS ann on 9mFy21	23.85
PE  ann 9mFY21	12.83
Market Cap	7805
Market Cap  /  Sales	1.8

Pros

• Backward and forward integration
• Proximity to raw material sources & key industries and demand clusters
• Advance technology adept to market practices
• Captive power generation
• Captive railway siding
• Good financial strength

Cons

• The demand and pricing in the steel industry is volatile and are sensitive to the cyclical nature of the industries it serves.
• A reduction in import duties on steel products in India may lead to increased competition from foreign companies.
• Two of its group companies, SFAL and SPSPL, are engaged primarily in manufacturing of ferro alloy products and the metal manufacturing segment, which could lead to some conflict of interest.

Shyam Metalics IPO: Assessment

• As per CRISIL, Government’s impetus on infrastructure is expected to drive double digit steel demand growth in 2022. Further steel demand is expected to continue its strong growth rate at 5.0% to 6.0% through FY 2025.
• Consolidated debt of Shyam Metalics for the period stood at ₹886.29 crore.
• Since the commencement of their operations in Fiscal 2005, the company has delivered a positive EBITDA in each of the Fiscals.
• Shyam Metalics has integrated operations across the steel value chain. In the period 9MFY21, Ferro alloys formed 15.47% of net sales ,TMT structural products, wire rods and pipes formed 37.39%, steel billets 13.97%, sponge iron 11.35% and Iron pellets contributed 21.81%.
• Shyam Metalics has strategically located manufacturing plants supported by robust infrastructure resulting in cost efficiencies; diversified product mix with strong focus on value added products; strong financial performance and credit ratings.
• Shyam Metalics is in the process of enhancing its aggregate installed metal capacity from 5.71 MTPA to 11.60 MTPA The aggregate installed capacity of captive power plants will increase from 227 MW to 357 MW. These expansions are expected to become operational between FY 2022 and FY 2025
• Shyam Metalics IPO was last reported to be commanding a GMP of about Rs. 130.
• Shyam Metlics IPO is demanding a P/E multiple of ~13x its annualized FY21 EPS and 14.6x its TTM EPS on its post-issue equity share capital.
• Listed industry peers of the company are Tata Steel Long Products, Prakash Industries, KIOCL etc. Other perrs include Tata Steel Ltd, Steel Authority of India Ltd, Jindal Steel and Power Ltd, JSW Steel Ltd etc. On a EV/EBITDA bais the IPO is priced as a multiple of 8.6x, which is higher than the peer average of 6.4x.
• I intend to apply in Shyam Metalics IPO. The Shyam Metaics IPO comes at at time when steel prices are on high and it seems to be taking full advantage of this fact. Still considering its integrated operations and good fancy for this sector coupled with good prospects, Shyam Metalics IPO looks good both from the angle of listing gains as well as short/ medium term portfolio.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.