Shyam Metalics cuts IPO size; grey market giving it a strong premium

Shyam Metalics cuts IPO size; grey market giving it a strong premium


NEW DELHI: Shyam Metalics and Energy is commanding a premium of Rs 100-130 per share (33-43 per cent) in the grey market ahead of its Rs 909 crore IPO that kicks off next week.

The price band for the issue has been fixed in the Rs 303-306 range, which was largely in line with the grey market expectations of Rs 303-304.

“The IPO price band came in line with Rs 303-304 range that the grey market was expecting. Given, the prospects of the metals sector and the ongoing momentum in the market, the issue seems to have come at the right time. Last heard, the unlisted stock was commanding a premium of Rs 130. If the market conditions stay unchanged, we do not expect this premium falling or rising much from these levels,” said Abhay Doshi, founder at Unlisted Arena, a player in the unofficial market for trading in unlisted shares.

The issue has been downsized from Rs 1,107 crore earlier, as the promoters decided to cut the offer for sale portion to Rs 252 crore from Rs 450 crore earlier, which some analysts said is a positive sign.

Sources told ETMarkets.com that the decision was taken based on the feedback received from a potential investor during the roadshows, who showed apprehension over the OFS size.

The size of fresh issuance of up to Rs 657 crore worth of shares has been kept unchanged.

The company has proposed to use the net proceeds from the fresh issue to repay or prepay up to Rs 470 crore of its debt and those of its subsidiary, Shyam SEL and Power, and for other general corporate purposes.

Some of the company’s nearest peers would be Tata Steel Long, Tata Metaliks.

Narottam Dharawat, Founder at Dharawat Securities, said the IPO may see good traction as it comes after a period of IPO lull. “The stock is commanding a grey market premium of Rs 100-110. This would be the first IPO after a brief lull and so good demand is likely. There are fair chances of the IPO doing well.”

Shyam Metalics is a producer of intermediate and long steel products, such as iron pellets, sponge iron, steel billets, TMT, structural products, wire rods and ferroalloys. It also focuses on high-margin products such as customised billets and specialised ferroalloys for special steel applications.

Unlike flat steel products, whose market is dominated by big players, long steel has a fair share of smaller companies. Shyam Metaliks is among the largest producers of ferroalloys in terms of installed capacity in India, as of February end.

It is among the leading players in terms of pellet capacity and the fourth largest in the sponge iron industry in terms of sponge iron capacity in India.

The company is in the process of further diversifying its product portfolio by entering segments, such as pig iron, ductile iron pipes and aluminum foil. It has manufacturing plants in Odisha and West Bengal, with plants at Sambalpur and Jamuria being forward- and backward-integrated, the company said in a release.

For the nine months ended December 31, power units produced from captive power plants accounted for 79.58 per cent of total power consumed.

Shyam Metalics had 42 distributors across 13 states and one Union Territory in India, as of December 31, 2020. It counts Jindal Stainless,

(Hisar), and Rimjhim Ispat and international customers such as Norecom DMCC, Norecom and POSCO International Corporation, among its clients.

“We have a positive outlook on the Shyam Metalics IPO, as the company is one of the least leveraged companies in the steel sector, having a working capital debt of Rs 682 crore and long term debt of Rs 182 crore,” said Yash Gupta Equity Research Associate at Angel Broking.



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