The steel maker has cut the size of its IPO from ₹1,107 crore to ₹909 crore, after promoters offloaded ₹252 crore shares from their own stake, against ₹450 crore planned earlier.
The offer for sale (OFS) comprises a sale of upto ₹37 crore by Shubham Capital Pvt. Ltd, ₹63 crore by Shubham Buildwell Pvt. Ltd, ₹25 crore by Kalpataru Housefin and Trading, ₹30 crore by Dorite Tracon and upto ₹97 crore by Narantak Dealcom Ltd.
The fresh issue size remains the same at ₹657 crore. The lead managers to the issue are ICICI Securities, Axis Capital, IIFL Securities, JM Financial and SBI Capital Markets.
At Annualized EPS of 26.04, the IPO is priced at 11.8x P/E and 2.18x P/BV (9MFY21 BV). It will command a post listing diluted market cap of ₹7805 Cr, which is 1.95x price to sales. Tata Steel trades at 0.87x P/S, JSW Steel trades at 2.17x P/S, while SAIL, Jindal Stainless and Tata Steel BSL all trade below 1x P/S, analysts said.
The IPO timing couldn’t have been more perfect. The commodity cycle is on an upswing with tailwinds working in the steel makers’ favour along with extreme bullishness for the sector. The steel sector remains exposed to prices globally, which declined significantly in fiscal 2016 impacting realizations and operating profitability – The group's operating margin declined to 9.4% (Number from Crisil rating report in Aug 2020), currently, its OPM is at 18.2% (9MFY21. 14.3% in FY20,20.5% in FY19 and 18.1% in FY18, which is highly cyclical) given the upcycle!
“The company may perform till the time steel/commodity cycle is in upswing, but the company is a sure-shot ‘Avoid’, given the highly cyclical nature of the steel business and the current prices being much higher than the last 20 years average. The questionable criminal litigation that entails the owners & group companies being in the same business & checkered acquisitions in the past doesn’t help us either" said Aditya Kondawar COO, JST Investments.
As of December 2020, the integrated metal producing company had a standalone debt of ₹381.12 crore, while Shyam Sel and Power Ltd (SSPL) had a debt of ₹398.60 crore. Consolidated debt of Shyam Metalics for the period stood at ₹886.29 crore.
For the nine-month period ended December, Shyam Metalics reported a revenue of ₹3,933.08 crore compared with ₹3,283.09 crore a year ago. Net income for the period was at ₹456.32 crore versus ₹260.36 crore a year ago.
Manufacturer of long steel products and ferro alloys, Shyam Metalics is based in Kolkata.
Its manufacturing units are located at Sambalpur in Odisha, and Jamuria and Mangalpur, in West Bengal. As of December, it had an aggregate installed capacity of 5.71 million tonne (MT) per annum. It also has captive power plants with an aggregate installed capacity of 227 MW.
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