Things to know before investing in Shyam Metalics IPO

Whilst our government somehow managed to bring the Covid numbers under control, one number keeps climbing new heights. It is the IPO count that hits the investors every month. Forming part of the ever-increasing number is the Shyam Metalics and Energy Limited IPO. 

The Shyam metalics and energy limited IPO will open for subscription on June 14, 2021. Hence, in order to finalise your bid for the same, it's mandatory that you are aware of the key details. 

Shyam Metalics and Energy Limited - Company details

Shyam metalics is one of the leading companies in the sector with a special position as the largest producer of ferro alloys and a noted player in the production of sponge in the industry. The company's management includes Mahabir Prasad Agarwal, Brij Bhushan Agarwal, Sanjay Kumar Agarwal and Deepak Kumar Agarwal. Established in the year 2002, Shyam Metalics and Energy Limited (SMEL) is involved in the business of production and distribution of wire rods, structured products and ferro alloys.  

Apart from that, the company has about 3 manufacturing plants in its possession. It comprises consumers, both institutional and end-users hailing from the both domestic and international level. Furthermore, it has tie-ups with partners across 13 states. A few of them worth mentioning are as follows, POSCO international company, Traxxys North America LLC, Norecom Limited, etc. 

Shyam metalics and Energy limited IPO details

The entire issue will be summing to about INR 909 crores. This comes in as both offer for sale comprising 252 crores worth share and a fresh issue holding shares worth 657 crores. The last date to make a subscription has been fixed as June 16, 2021. Post the issue the promoter holding will fall to 88.35%. 

Shyam Metalics and Energy Limited IPO – Price Details

The price of each equity share is fixed at 303 to 306. This will be a book building issue, for which the minimum price has been fixed at 13,770 containing 1 lot of 45 shares. Thereafter the investor will have to subscribe in multiples of 45. Any investor can bid for a maximum of 14 such lots whose price is fixed at Rs 192,780. 

The funds that are raised through the IPO will be directed towards financing the general corporate needs and requirements. They will also be using the funds to pay off the debt partially or fully. This will also include debts that were taken for the company and its subsidiary units. 

35% of the issue will be allocated to retail investors. Moreover, if you are an employee of the company then you are entitled to a discount of 15%. The face value of the issue is fixed at Rs 10 per stock and will be issued in both NSE and BSE. All the related procedures, namely the allotment, initiation of refunds and listing of stocks, are expected to be finished by June 24, 2021. ICICI securities limited, IIFL holdings limited, JM Financial Consultants and SBI capital will act as the lead managers of the issue. 

Details of the issue

Shyam Metalics limited Financials

Though the company saw a stumble at the end of 2020 by posting a comparatively lower margin which stood at 7.8% it posted a profit of 506.26 crores at the very start of the current year. The approximate earnings per share of the company stood at 14 as of March 2020. The P/E ratio is at 12.50, indicating that the company is undervalued. 

Some of its listed peers include Tata steel Ltd, JSW steel Ltd, SAIL and Jindal Steel and Power. The company has been performing better than its peers in terms of revenue growth which stands at 12% for the same. 

Should you buy the stock? 

Being a leader in the industry is always a big plus. Adding to that, the company offers cookie points to the investor by bringing up its achievements in specific fields such as Ferro, which easily put it among the top metal producers in India. Unlike most others, the company has a well-diversified portfolio with a mix of customers from both domestic and international institutions. 

Strong financial performance can also be added as another advantage. The location of the company has ensured positive winds due to its proximity to raw materials. Post the issue, it is expected that the company will drag down the debt signalling a green light for potential investors. The combination of large production capacity and adaptive technology all act in its favour. 

However, given the current scenario, it is doubtful as to how the entire plan of the company would replicate. 

In conclusion

While there are a handful shortcomings, the company as a whole happens to be a good pick for any investor. With a premium of 100 -103 in the grey market, the company is sure to grab a lot of attention. However, we recommend you run a thorough analysis before you put your cash into it.