Shyam Metalics and Energy Limited (SMEL) is the leading integrated metal producing company based in India 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 and one of the leading player in terms of pellet capacity and the fourth-largest player in the sponge iron industry in terms of sponge iron capacity in India. 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.
SMEL currently have three manufacturing plants that are located at Sambalpur in Odisha, and Jamuria and Mangalpur in West Bengal and the aggregate installed metal capacity of the manufacturing plants was 5.71 million tonne per annumas of December 31, 2020. They primarily produce intermediate and long steel products, such as, iron pellets, sponge iron, steel billets, TMT, structural products, wire rods, and ferro alloys products.
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Mahabir Prasad Agarwal, Brij BhushanAgarwal, Sanjay Kumar Agarwal, Subham Capital Pvt Ltd, Subham Buildwell Pvt Ltd, Narantak Dealcomm Ltd, KalpataruHousefin, DoriteTracon and Toplight Mercantiles Pvt Ltd are the company promoters. The promoters had 100% of the pre issue holding and will have 88.35% of post issue holdings.
Public Issue Details:
Offer for sale: Fresh issue of approx. 21,470,580 equity shares at Rs. 10,aggregating up to Rs. 657 Cr and OFS of approx. 8,235,315 equity shares,aggregating up to Rs. 252 Cr.
Total IPO Size: Rs. 909Cr.
Price band:Rs. 303 – 306.
Objective: To make prepayment/repayment of company’s and its subsidiary (SSPL)’s debt fully or partially and meet general corporate purposes.
Bid qty: minimum of 45 shares (1 lot) for Rs. 13,770 and maximum of 14lots.
Offer period: 14th June 2021 –16th June 2021.
Date of listing: 24th June 2021.
- Manufacturing plants are strategically located in close proximity to the mineral belt in eastern India and has a robust infrastructure.
- Leading integrated metal producer in India.
- Diversified product mix with strong focus on value added products.
- Experienced promoters, board and senior management team.
- Strong financial performance and distribution network.
- The demand and pricing in the steel industry is volatile and are sensitive to the cyclical nature of the industries it serves.
- The steel industry is characterized by volatility in the prices of raw materials and energy which could adversely affect their profitability.
- Covid-19 have impacted operations in the past and may impact in future
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When looking at the broad industry view, Steel demand is closely related with GDP growth, with steel demand to GDP growth multiplier varying across phases. The 2021 budget is a growth centric and expansionary budget which focuses on improving India’s mid-term growth trajectory and the government’s impetus on infrastructure is expected to drive double digit steel demand growth in Fiscal 2022 and SMEL being one of the leading integrated metal producer in India is in a prime position to take advantage of this situation.
On the financial side of things SMEL have relatively better financial strength as compared to other companies operating in the long and intermediary steel sector. They have reported Rs. 340.33 Cr, Rs. 636.78 Cr and Rs. 528.04 Cr in the FY20, FY19 and FY18 respectively. In the nine months from 31 Mar 2020 to 31 Dec 2020 they have earned a net profit of Rs. 456.32 Cr.
On average EPS of 18.93 in last 3 years, the P/E ratio is 16x. On the upper price band of Rs 306 and EPS of Rs 14.57 for FY20, the P/E ratio works out to be 21x. If we annualize its 9 months ended Dec-21 EPS, the P/E ratio is 12x. Hence the company is asking P/E range of 12x to 21x. There are listed peers like Tata Steel which is trading at P/E 89x (Highest) and SAIL at P/E 25x (Lowest) and the industry average is 43x. Hence, it appears reasonably priced when compared to its peers. Considering all the above factors we recommend “SUBSCRIBE” to this issue.
This article should not be construed as an investment advise, please consult your Investment Adviser before making any investment decision.