Please refer to important disclosures at the end of this report
1
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.
Y/E March (` cr)
FY2018
FY2019
FY2020
9MFY2021
Net Sales
3,842.6
4,606.4
4,362.9
3,933.1
% chg
-
19.9
-5.3
19.8
Net Profit
528.0
636.8
340.3
456.3
% chg
-
20.6
-46.6
75.3
EBITDA (%)
18.2
20.5
14.8
18.3
EPS (Rs)
90.8
25.9
14.6
19.5
P/E (x)
3.4
11.8
21.0
15.7
P/BV (x)
0.8
2.9
2.5
2.2
ROE (%)
22.9
24.3
12.0
13.9
ROCE (%)
17.7
21.7
7.9
11.4
EV/EBITDA
3.0
8.3
13.0
11.1
EV/Sales
0.5
1.7
1.9
2.0
SUBSCRIBE
Issue Open: June 14, 2021
Issue Close: June 16, 2021
Offer for Sale: Rs. 252cr
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 88.4%
Others 11.6%
Post Issue Shar eholding Pattern
Post Eq. Paid up Capital: Rs 237.9cr
Issue size (amount): Rs 909 cr
Price Band: Rs 303-306
Lot Size: 45 shares and in multiple thereafter
Post-issue mkt. cap: *Rs 7735 cr - **Rs 7805 cr
Promoters holding Pre-Issue: 100.0%
Promoters holding Post-Issue: 88.4%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: Rs. 657 cr.
Issue Details
Face Value: Rs 10
Present Eq. Paid up Capital: Rs 233.6 cr
Jyoti Roy
+022 39357600, Extn: 6842
[email protected]
Shyam Metalics and Energy Limited
f
IPO Note
June 11, 2021
Shyam Metalics Ltd | IPO Note
June11, 2021
2
Company background
Company commenced its operation 2005 and has delivered operation profitability
since then with positive EBITDA. It primarily produces intermediate and long steel
products, such as, iron pellets, sponge iron, steel billets, TMT, structural products,
wire rods, and ferro alloys products with a specific focus on high margin products,
such as, customised billets and specialised ferro. Its Sambalpur manufacturing
plant caters to customers in the southern and western regions of India whereas
Jamuria and Mangalpur manufacturing plants caters to customers in northern and
eastern regions of India. Its domestic customers include Jindal Stainless Limited,
Jindal Stainless (Hisar) Limited, and Rimjhim Ispat Limited. Its international
customers include Norecom DMCC, Norecom Limited, POSCO International
Corporation, World Metals & Alloys (FZC), Traxys North America LLC, JM Global
Resources Limited, Goenka Steels Private Limited and Vijayshri Steel Private
Limited.
Issue details
The issue size is ` 909cr, which comprises of fresh issues of up to. `657 crore &
offer for sale of ` 252cr in the price band of `303-`306 per share.
Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
233,610,100
100.0
225,374,806
88.4
Public
0
0.0
29,705,882
11.6
Total
233,610,100
100.0
255,080,688
100.0
Source: Company, Angel Research & RHP.
Objectives of the Offer
Repayment/pre-payment, in full or part, of debt of Company and SSPL
(one of the Subsidiaries).
General corporate purposes.
Key Management Personnel
Mahabir Prasad Agarwal is the Non-Executive Chairman of the Company. He has
been a Director of the Company since April 6, 2018. He is the founder of, and has
been a director of, its Subsidiary, SSPL, since its inception and is one of the initial
shareholders of the Company. He has over three decades of experience in the
steel and ferro alloys industry.
Brij Bhushan Agarwal is the Vice Chairman and Managing Director of the
Company. He has been a Director of the Company since its inception in
December, 2002. He holds a bachelor’s degree in commerce from University of
Calcutta. He has over three decades of experience in the steel and ferro alloys
industry. He is primarily responsible for strategic planning, future expansion,
business development, marketing, human resources and corporate affairs of the
Company.
Shyam Metalics Ltd | IPO Note
June11, 2021
3
Sanjay Kumar Agarwal is the Joint Managing Director of the Company. He holds a
bachelor’s degree in commerce, with honours, from the University of Calcutta. He
has over 17 years of experience in the steel and ferro alloys industry. He is
primarily responsible for the operations of manufacturing plants at Sambalpur,
Jamuria and Mangalpur, with focus on cost control, production efficiency and
competitive procurement of raw material.
Deepak Kumar Agarwal is a Whole-Time Director of the Company. He has been a
Director of the Company since July 14, 2014. He holds a bachelor’s degree in
commerce, with honours, from University of Calcutta. He is also an associate
member of the Institute of Company Secretaries of India. He has previously been
associated with Shyam SEL and Power Limited and has over a decade of
experience in the steel and ferro alloys industry. He is responsible for handling the
finance, risk management and corporate affairs of the Company and its
Subsidiaries.
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2018
FY2019
FY2020
9MFY2021
Total operating income
3,842.6
4,606.4
4,362.9
3,933.1
% chg
-
19.9
-5.3
19.8
Total Expenditure
3,141.6
3,661.7
3,717.3
3,213.7
Cost of material consumed
2,296.79
2,782.77
2,718.22
2,437.36
Purchase of stock-in-trade
128.28
28.62
63.25
4.57
Excise Duty
95.41
-
-
-
Change in inventories
-54.37
-25.12
-103.49
13.41
Employee benefits expense
106.45
145.03
168.36
124.74
Other expenses
569.00
730.39
870.99
633.63
EBITDA
701.0
944.7
645.6
719.4
% chg
-
34.8
-31.7
58.9
(% of Net Sales)
18.2
20.5
14.8
18.3
Depreciation& Amortization
215.0
194.6
296.6
220.0
EBIT
486.0
750.1
348.9
499.4
% chg
-
54.4
-53.5
100.5
(% of Net Sales)
12.6
16.3
8.0
12.7
Finance costs
48.9
64.4
85.9
55.8
Other income
77.8
78.2
32.4
62.5
(% of Sales)
2.0
1.7
0.7
1.6
Recurring PBT
517.4
763.9
295.5
506.3
% chg
-
47.6
-61.3
127.9
Share of profits from Associates/JVs
2.4
0.0
0.0
0.2
Tax
-10.7
127.1
-44.9
49.9
PAT (reported) after Minority Int.
424.4
604.1
340.3
456.3
% chg
-
42.3
-43.7
75.1
(% of Net Sales)
11.0
13.1
7.8
11.6
Basic & Fully Diluted EPS (Rs)
90.8
25.9
14.6
19.5
Source: Company, Angel Research
Shyam Metalics Ltd | IPO Note
June11, 2021
4
Consolidated Balance Sheet Statement
Y/E March (` cr)
FY2018
FY2019
FY2020
9MFY2021
SOURCES OF FUNDS
Equity Share Capital
46.7
233.6
233.6
233.6
Other equity (Retained Earning)
1,807.3
2,256.1
2,592.4
3,051.7
Shareholders’ Funds
1,854.0
2,489.7
2,826.0
3,285.3
Total Loans & Minority Int.
689.9
660.5
1,276.6
869.1
Other liabilities
203.8
313.3
315.7
245.4
Total Liabilities
2,747.7
3,463.4
4,418.3
4,399.8
APPLICATION OF FUNDS
Property, Plant and Equipment
1,723.0
1,729.8
1,968.5
1,837.9
Right-of-use assets
23.4
43.5
42.7
42.0
Capital work-in-progress
90.6
357.7
235.4
351.0
Intangible assets
0.4
0.8
0.8
0.6
Intangible Assets under Development
0.7
-
-
-
Current Assets
1,494.9
1,786.7
2,584.9
2,313.0
Inventories
558.5
732.1
1,486.7
1,150.0
Investments
133.2
205.4
71.6
97.6
Trade receivables
368.7
212.9
259.0
243.7
Cash and Cash equivalents
8.1
9.9
29.7
15.4
Bank balances other than (iii) above
45.2
87.9
91.5
162.8
Loans
6.0
47.4
4.2
15.8
Other financial assets
81.0
68.6
66.2
74.2
c) Current Tax Assets (Net)
-
4.2
4.8
-
Other current assets
294.1
418.2
571.2
553.5
Current Liability
723.0
589.0
785.5
705.4
Net Current Assets
771.9
1,197.7
1,799.4
1,607.6
Other Non-Current Asset
137.5
133.9
371.5
560.8
Total Assets
2,747.7
3,463.4
4,418.3
4,399.8
Source: Company, Angel Research
Shyam Metalics Ltd | IPO Note
June11, 2021
5
Consolidated Cash flow
Y/E March (`cr)
FY2018
FY2019
FY2020
9MFY2021
Operating profit
762.26
988.39
674.50
742.33
Net changes in working capital
-401.18
-363.83
-534.84
-25.53
Cash generated from operations
361.1
624.6
139.7
716.8
Direct taxes paid (net of refunds)
-114.13
-168.00
-45.40
-60.00
Cash flow from operating activities
246.9
456.6
94.3
656.8
Loans Refunded/ (Given)
27.263
-41.382
17.988
-11.604
Dividend Received
2.46
20.558
0.663
0.074
Others
(171.8)
(546.1)
(296.1)
(219.6)
Cash Flow from Investing
(142.1)
(567.0)
(277.4)
(231.1)
Proceeds/(Repayment)
-112.916
175.667
299.878
-401.977
Finance costs paid
-49.253
-63.491
-87.833
-53.896
Effect of Foreign Exchange Fluctuation
24.472
-
-
15.839
Cash Flow from Financing
(137.7)
112.2
212.0
(440.0)
Inc./(Dec.) in Cash
(32.8)
1.8
28.9
(14.3)
Opening Cash balances
40.9
8.1
9.9
29.7
Closing Cash balances
8.1
9.9
38.8
15.4
Source: Company, Angel Research
Key Ratios
Y/E March
FY2018
FY2019
FY2020
9MFY2021
Valuation Ratio (x)
P/E (on FDEPS)
3.4
11.8
21.0
15.7
P/CEPS
2.2
9.0
11.2
10.6
P/BV
0.8
2.9
2.5
2.2
EV/Sales
0.5
1.7
1.9
2.0
EV/EBITDA
3.0
8.3
13.0
11.1
Per Share Data (`)
EPS (Basic)
90.8
25.9
14.6
19.5
EPS (fully diluted)
90.8
25.9
14.6
19.5
Cash EPS
136.9
34.2
27.3
28.9
Book Value
396.8
106.6
121.0
140.6
Returns (%)
ROE
22.9
24.3
12.0
13.9
ROCE
17.7
21.7
7.9
11.4
Turnover ratios (x)
Receivables (days)
35.0
16.9
21.7
22.6
Inventory (days)
53.1
58.0
124.4
106.7
Payables (days)
-
-
-
-
Working capital cycle (days)
88.1
74.9
146.0
129.3
Source: Company, Angel Research
Shyam Metalics Ltd | IPO Note
June11, 2021
6
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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