Shyam Metalics IPO opens on Monday; should you subscribe?

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The initial public offering (IPO) of Shyam Metalics and Energy will hit Dalal Street on Monday, June 14 to raise Rs 909 crore. The three-day offering ends on June 16 and the company has fixed a price band of Rs 303-306 per equity share for the face value of Rs 10 each.

A retail investor can bid for a minimum of 45 equity shares and in multiples, thereafter, translating to a minimum bidding amount of Rs 13,770 at the higher end of the price band. A retail investor can at max apply for 13 lots or 630 shares for Rs 1,92,780.

Up to 50% of the net offer has been reserved for Qualified Institutional Buyers (QIBs), 35% for the retail category and the remaining 15% portion for non-institutional investors. While up to 3 lakh shares have been fixed for subscription by employees. A discount of Rs 15 per share will be given to the eligible employees bidding in the employee reservation portion.

Grey market premium

In the grey market, Shyam Metalics & Energy shares were trading at Rs 451 implying a premium of Rs 145 or 47% over the IPO price on Friday.

“The IPO of Shyam Metalics comes at a time when the metal sector is enjoying a dream run and the momentum advantage is totally in favour of metal stocks,” said grey market tracker Abhay Doshi, founder of Unlisted Arena.

On the financial front, price at the upper band is Rs 306, the PE (price to earnings) ratio based on annualised FY21 EPS comes at 12x which seems to be quite reasonable and leaving enough headroom for investors, added Doshi.

Should you subscribe

Brokerages are gung-ho and have assigned subscribe rating to the issue. Here’s what they have to say.

Marwadi Shares and Finance | Subscribe

“Considering the trailing twelve months (Dec 20) adjusted EPS (earnings per share) of 21.02 on a post-issue basis, the company is going to list at PE of 14.6X with a market cap of Rs. 78,055 million whereas its peers namely Tata Steel and JSW Steel are quoting at higher PE of 16.6X and 21.6X respectively. The company is a leading integrated metal producer with strategically located manufacturing facilities and good financial performance and distribution network along with favourable valuation,” noted the report by Marwardi Shares and Finance.

Choice Broking | Subscribe with Caution

“At the higher price band of Rs. 306, the company is demanding a trailing twelve-month enterprise value by EBITDA (earnings before interest tax depreciation & amortization) multiple of 8.6x, which is at a premium to the peer average of 6.4x. Despite factoring in an exponential rise in EBITDA in Q4 FY21, the company still appears to be overvalued in relation to its peers,” said the note.

Primary market expert Dilip Davda | Subscribe for Long Term

Shyam Metalics & Energy is one of the leading integrated metal producing and profit-making company. Based on its financial data the issue fully priced in. Investors with a fancy for metal counters may consider an investment with a long-term perspective.

Timeline

The issue is likely to finalise the basis of allotment by June 21, and the initialisation of funds will take place by June 22. While the credit of equity shares to depository accounts of allottee on June 23. The steel mill is expected to make its stock market debut on June 24, 2021.