Shyam Metalics and Energy Limited (SMEL) is a leading integrated metal producing
company based in India with a focus on long steel products and is one of the
largest ferro alloys producer in terms of installed capacity. It has geographical
advantages, is present across the value chain and has ability to alter its product
mix. SMEL’s installed capacity stands at 5.71 MTPA and has captive power plants
with installed capacity of 227 MW which the company intends to expand to 11.6
MTPA and 357 MW, respectively over FY21E-25E.
Positives: (a) Integrated operations across the steel value chain (b) Strategically
located manufacturing plants supported by robust infrastructure resulting in cost
and time efficiencies (c) Diversified product mix with strong focus on value added
products, such as, ferro alloys, association with reputed customers and robust
distribution network (d) Strong financial performance and credit
Investment concerns: (a) Loss of any of suppliers or a failure by suppliers to deliver
some of primary raw materials may impact business adversely. (b) Business
depends on stable and reliable logistics and transportation infrastructure. (c) The
demand and pricing in the steel industry is volatile and are sensitive to the cyclical
nature of the industries it serves. (d) The COVID-19 pandemic and resulting
deterioration of general economic conditions has impacted the business and results
of operations.
Outlook & Valuation: The steel sector is experiencing tailwinds on account of rising
infrastructure spends by major economies. Domestically, prospects are looking up
which is driving the capacity addition frenzy with high likelihood of demand
outstripping supply. SMEL, with its operational efficiencies stands to benefit as it will
be nearly doubling its capacities which are slated to come onstream FY23E
onwards, if not earlier. At 9.2x TTM EV/EBITDA, valuations are optically high but
volume + realization growth and improving EBITDA/tonne (higher value added
contribution) are resulting in reasonable FY23E EV/EBITDA. Hence, we recommend
“SUBSCRIBE” on the Issue.
Offer period Bid/Offer Opens On: Monday, 14th June, 2021
Bid/Offer Closes On: Wednesday, 16th June, 2021
Issue Details Fresh Issue of Equity Shares aggregating up to Rs. 657 Cr.
Offer for sale of Equity Shares aggregating up to Rs.252 Cr.
Issue Size(in Crore) Rs. 909 Cr.
Price Band Rs. 303 - 306
Bid Lot 45 shares and in multiple thereof
Employee Reservation Up to 300,000 Equity Shares (Approx. Rs. 9 Cr.)
QIB 50% of the net offer (Rs. 450 Cr.)
NIB 15% of the net offer ( Rs. 135 Cr.)
Retail 35% of the net offer(Rs. 315 Cr.)
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