The public offer of Shyam Metalics and Energy has received a 1.23 times subscription on June 14, the first day of bidding.
The offer has received bids for 2.59 crore equity shares against the IPO size of over 2.1 crore equity shares, the subscription data available on the exchanges showed.
The reserved portion of retail investors has seen a 2.18 times subscription, while employees and non-institutional investors have put in 27 percent and 70 percent bids, against their reserved portion. Qualified institutional buyers have put in bids for 3,375 equity shares against their reserved portion of 59.4 lakh equity shares.
The IPO size excluded the anchor portion. Last Friday, the company had mopped up Rs 270 crore from anchor investors.
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Incorporated in 2002, Shyam Metalics and Energy focuses on long steel products and ferro alloys. It has three manufacturing plants in Sambalpur, Odisha, and Jamuria and Mangalpur in West Bengal.
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It is amongst the largest producers of ferro alloys in terms of installed capacity in India, and it is one of the leading players in terms of pellet capacity. It is the fourth largest player in the sponge iron industry in terms of sponge iron capacity in India, as of March 2020.
The company intends to raise Rs 909 crore through its public issue comprising a fresh issue of Rs 657 crore and an offer for sale of Rs 252 crore by existing selling shareholders. The net proceeds from fresh issue will be utilised towards repayment of debts.
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"At the upper price band of Rs 306, Shyam Metalics is available at EV/EBITDA of 9.1x (FY21 annualized) which appears fully priced. We assign a Subscribe rating, with a short to medium-term perspective due to optimistic international prices and rise in domestic demand," said Geojit Financial Services.
"Shyam Metalics is the least leveraged among its peers, the debt/equity is at 0.3x in 9MFY21. While the debt to EBITDA is at 1.3x in 9MFY21 compared to 2.5x in 9MFY20. The proceeds from the offer will be used to pay their debt obligations which will further de-leverage their balance sheet and increase profitability," the brokerage added.
The company has a diversified product mix such as iron pellets, sponge iron, steel billets, TMT, structural products, wire rods, and ferro alloys.
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Shyam Metalics' eight captive power plants, which account for around 90 percent of the total power units consumed, make it self-reliant and cost-effective. It is expected to double its current aggregate installed metal capacity from 5.71 MTPA, as of December 2020, to 11.60 MTPA (million tonne per annum) by FY25.
Geojit believes the domestic steel demand impacted by COVID-19, will pick up in FY22 and continue its strong growth at 6 percent through FY25. "Restrictions on Chinese exports due to higher domestic demand and surging international steel prices will benefit Indian steelmakers like Shyam Metalics."
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