Shyam Metalics and Energy Ltd has filed a draft red herring prospectus (DRHP) with the Securities Exchange Board of India (SEBI) to raise nearly Rs 1,107 crore through an initial public offering (IPO). The offer comprises a fresh issue of Rs 657 crore and an offer for sale (OFS) of up to Rs 450 crore. It may decide to undertake a pre-IPO placement of Rs 250 crore subject to consultation with merchant bankers, the DRHP said.
The firm may opt for Rs 250-crore pre-IPO placement, subject to consultation with merchant bankers. Equity shares of Metalics and Energy Ltd are proposed to be listed on BSE and National Stock Exchange (NSE). The lead managers to the issue are ICICI Securities, Axis Capital, IIFL Securities, JM Financial and SBI Capital Markets. The company will use the proceeds from the issue to repay up to Rs 657 crore debt of the company and its arm SSPL.
As of December 2020, the integrated metal producing company had a standalone debt of Rs 381.12 crore, while SSPL had a debt of Rs 398.60 crore. The consolidated debt of Shyam Metallics for the period stood at Rs 886.29 crore. Shyam Metalics is based in Kolkata and is focussed on long steel products and ferroalloys. It reported a revenue of Rs 3,933.08 crore against Rs 3,283.09 crore for the nine-month period ended December 2020. Net income for the period was at Rs 456.32 crore versus Rs 260.36 crore a year ago.
According to the draft papers, Shyam Metalics and Energy Ltd plans to utilise the funds raised through IPO for repayment and/or pre-payment, in full or part, of debt of the company and SSPL, one of its subsidiaries; and for general corporate purposes. The promoters of the company are Brij Bhushan Agarwal, Sanjay Kumar Agarwal, Mahabir Prasad Agarwal, Subham Buildwell Private Limited, Narantak Dealcomm Limited, Subham Capital Private Limited, Kalpataru Housefin & Trading Private Limited, Dorite Tracon Private Limited and Toplight Mercantiles Private Limited.
The listed peers of Shyam Metalics and Energy Ltd are Tata Steel Ltd, JSW Steel Ltd, Steel Authority of India Ltd, Jindal Steel and Power Ltd and Tata Steel Long Products Ltd. According to the DRHP, Tata Steel has a P/E of 57.38x, JSW Steel Ltd of 2.25 x and Steel Authority of India Ltd 12.63x. For the nine months ended December 31, 2020, Shyam Metalics and Energy Ltd’s profit stood at Rs 456.3 crore while in fiscal 2020, it stood at Rs 340.3 crore. The company currently operates three manufacturing plants located at Sambalpur in Odisha and Jamuria and Mangalpur in West Bengal.
Shyam Metalics and Energy Ltd has consistently outperformed its peers in terms of profitability, largely on account of backward (such as pellets) and forward integrated operations. Moreover, better operating performance is also attributed to a well-diversified presence of SMEL and de-risk itself from a downfall in any particular segment within the value chain. The company also enjoys low freight costs following captive railway siding. As of December 31, 2020, the aggregate installed metal capacity of its manufacturing plants was 5.71 million tonnes per annum (comprising intermediate and final products).