Should you subscribe to Shyam Metalics and Energy IPO?

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The Rs 909 crore initial public offer of Shyam Metalics and Energy got subscribed 27% on the first day of the bidding on Monday till 11.20 am. Earlier, the company on Friday said it has collected Rs 270 crore from anchor investors.

Shyam Metalics and Energy informed bourses that it has allocated 88,21,764 equity shares to 21 anchor investors at a price of Rs 306 apiece, aggregating to Rs 269.94 crore. As many as 12 domestic investors, including four mutual funds, two insurance companies and six Alternate Investment Funds (AIFs), and nine Foreign Portfolio Investors (FPIs) participated in the anchor book.

About the company Shyam Metalics and Energy (SMEL) is an integrated metal producing company focusing on long steel products and ferroalloys with the ability to sell intermediate and final products across the steel value chain. Incorporated in 2002, they are amongst the largest producers of ferroalloys in terms of installed capacity in India, as of February 2021. 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. They currently operate three manufacturing plants that are located at Sambalpur in Odisha, and Jamuria and Mangalpur in West Bengal.

Price band The company has set a price band of Rs 303-306 a share for its IPO, which will conclude on June 16. Shyam Metalics and Energy intends to utilise the net proceeds from the fresh issue for repayment or prepayment of debt worth Rs 470 crore and that of its subsidiary, Shyam SEL and Power Ltd, and for other general corporate purposes.

Should you subscribe? Geojit Financial Services: Subscribe At the upper price band of Rs 306, SMEL is available at EV/EBITDA of 9.1 times which appears fully priced. Geojit Financial Services assign a ‘Subscribe’ rating, with a short to medium-term perspective due to optimistic international prices and rise in domestic demand.

Marwadi Shares and Finance: Subscribe Considering the trailing twelve months (Dec 20) adjusted EPS (earnings per share) of 21.02 on a post-issue basis, the company is going to list at PE of 14.6 times with a market cap of Rs 7805.5 crore whereas its peers namely Tata Steel and JSW Steel are quoting at higher PE of 16.6 times and 21.6 times respectively. The company is a leading integrated metal producer with strategically located manufacturing facilities and good financial performance and distribution network along with favourable valuation.

Choice Broking: Subscribe with caution At the higher price band of Rs 306, the company is demanding a trailing twelve-month enterprise value by EBITDA (earnings before interest tax depreciation and amortization) multiple of 8.6 times, which is at a premium to the peer average of 6.4 times. Despite factoring in an exponential rise in EBITDA in Q4 FY21, the company still appears to be overvalued in relation to its peers.

Shyam Metalics and Energy listing The issue is likely to finalise the basis of allotment by June 21, and the initialisation of funds will take place by June 22. While the credit of equity shares to depository accounts of allottee on June 23. The steel mill is expected to make its stock market debut on June 24, 2021.