Shyam Metalics and Energy IPO

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(i) They are a leading integrated metal producing company based in India (Source: CRISIL Report) with a focus on long steel products and ferro alloys. They are amongst the largest producers of ferro alloys in terms of installed capacity in India, as of February 2021 (Source: CRISIL Report). They have the ability to sell intermediate and final products across the steel value chain. As of March 31, 2020, they were one of the leading players in terms of pellet capacity and the fourth largest player in the sponge iron industry in terms of sponge iron capacity in India (Source: CRISIL Report).

(ii) They were also one of the leading integrated steel and ferro alloys producers in the eastern region of India in terms of long steel products, as of March 31, 2020 (Source: CRISIL Report). They have a consistent track record of delivering operating profitability, and since the commencement of their operations in Fiscal 2005, they have delivered a positive EBITDA in each of the Fiscals.

(iii) They currently operate 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 the manufacturing plants was 5.71 million tonne per annum (“MTPA”) (comprising of intermediate and final products). Their manufacturing plants also include captive power plants with an aggregate installed capacity of 227 MW, as of December 31, 2020. They are also in the process of increasing the capacities of their existing manufacturing plants and captive power plants, which is expected to increase their aggregate installed metal capacity (comprising of intermediate and final products) from 5.71 MTPA, as of December 31, 2020, to 11.60 MTPA and captive power plants aggregate installed capacity from 227 MW, as of December 31, 2020, to 357 MW. These proposed expansions are expected to become operational between Fiscal 2022 and Fiscal 2025. In addition, they are 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 Fiscal 2022.

(iv) Clients of Shyam Metalics and Energy

a) Domestic customers

Jindal Stainless Limited, Jindal Stainless (Hisar) Limited, and Rimjhim Ispat Limited.

b) International customers

Norecom DMCC, Norecom Limited, POSCO International Corporation, World Metals & Alloys (FZC), Traxys North America LLC, JM Global Resources Limited, Goenka Steels Private Limited and Vijayshri Steel Private Limited.

Understanding the business model of Shyam Metalics IPO

Objects of the Shyam Metalics and Energy IPO:

The Offer comprises Fresh Issue (672 Crores) and Offer for Sale (252 Crores). The Fresh Issue will be utilized for following purpose. (i) Repayment for borrowings (ii) General corporate purpose

Shyam Metalics and Energy IPO Details:

Open Date: Jun 14 2021
Close Date: Jun 16 2021
Total Shares: 2,97,05,882
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built
Issue Size: 909 Cr.
Lot Size: 45 Shares
Issue Price: ₹ 303-306 Per Equity Share
Listing At: NSE,BSE
Listing Date: Jun 24 2021

Promoters And Management:

(i) Mahabir Prasad Agarwal, is the Non-Executive Chairman of the Company. He has been a Director of the Company since April 6, 2018. He is the founder of, and has been a director of, the Subsidiary, SSPL, since its inception and is one of the initial shareholders of the Company. He is actively involved in the CSR activities of our Company and our Subsidiary, SSPL. He has over three decades of experience in the steel and ferroalloys industry. (ii) Brij Bhushan Agarwal, is the Vice Chairman and Managing Director of the Company. He has been a Director of the Company since its inception in December 2002. He holds a bachelor’s degree in commerce from the University of Calcutta. He is also the Vice-Chairman and Managing Director of our Subsidiary, SSPL, and has been a director of SSPL since its inception. He has over three decades of experience in the steel and ferroalloys industry. He is primarily responsible for strategic planning, future expansion, business development, marketing, human resources, and corporate affairs of our Company. (iii) Sanjay Kumar Agarwal, is the Joint Managing Director of the Company. He has been a Director of the Company since its inception in December 2002. He holds a bachelor’s degree in commerce, with honors, from the University of Calcutta. He has over 17 years of experience in the steel and ferroalloys industry. He is primarily responsible for the operations of our manufacturing plants at Sambalpur, Jamuria, and Mangalpur, with a focus on cost control, production efficiency, and competitive procurement of raw material. (iv) Deepak Kumar Agarwal is a Whole-Time Director of the Company. He has been a Director of the Company since July 14, 2014. He holds a bachelor’s degree in commerce, with honors, from the University of Calcutta. He is also an associate member of the Institute of Company Secretaries of India. He has previously been associated with Shyam SEL and Power Limited and has over a decade of experience in the steel and ferroalloys industry. He is responsible for handling the finance, risk management and corporate affairs of our Company and its Subsidiaries.

Financials of Shyam Metalics and Energy IPO:

Particulars (in Cr.) 9MFY21 Mar-20 Mar-19 Mar-18
Sales 3,933.08 4,362.89 4,606.40 3,842.57
Cost of Material Consumed 2,437.36 2,718.22 2,782.77 2,296.79
Purchase of Stock-in-Trade 4.57 63.25 28.62 128.28
 Excise Duty - - - 95.41
Change in Inventories 13.41 -103.49 -25.12 -54.37
Employee Benefits Expense 124.74 168.36 145.03 106.45
Other Expenses 633.63 870.99 730.39 568.99
Operating Profit 719.37 645.56 944.71 701.02
OPM % 18.29% 14.80% 20.51% 18.24%
Other Income 62.55 32.42 78.17 77.83
Interest 55.84 85.88 64.43 48.86
Depreciation 219.97 296.65 194.58 215.05
Profit before tax 506.26 295.46 763.90 517.39
Total Tax Exps 49.94 -44.86 127.12 -10.65
Net Profit 456.32 340.33 636.78 528.04
NPM % 11.60% 7.80% 13.82% 13.74%
No. of shares 23.36 23.36 23.36 23.36
EPS in Rs 19.53 14.57 25.86 18.17

Comparison With Peers:

Peers Revenue Growth PAT Growth OPM ROE EV EBITDA EV/EBITDA P/E
Tata Steel Ltd 9% -17% 19% 10% 202975 30331 6.69 18.00
JSW Steel Ltd 4% 8.38% 25% 17% 206662 20141 10.26 22.00
SAIL 3% NA 21% 8.31% 97115 13021 7.46 15.00
Jindal Steel and Power 5% NA 34% 11.45% 57000 13184 4.32 12.00
Shyam Metallic 12% 4.81% 19% 15.45% 7950 958 8.30 12.50

Recommendation on Shyam Metalics and Energy IPO:

Review and Recommendation of Shyam Metalics IPO by IZ team is 5/10. 1. The sector in which company is operating is the hottest sector of town. Diversified product mix with strong focus on value added products. Integrated operations across steel value chain. It means they manufacture raw materials, final products and having own distributors. 2. The total debt on books is 864 Crores which will get reduced to ~400 Crores after IPO. Which is big positive. 3. P/E of 12.50 looks undervalued. However, the EV/EBITDA metric looks stretched at current valuation

Registrar of Shyam Metalics and Energy IPO:

  1. Kfin Technology Private Limited

Company Address:

Trinity Tower, 7th Floor, 83, Topsia Road, Kolkata – 700046, West Bengal, India

Discussion on Shyam Metalics and Energy IPO:

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