Shyam Metalics IPO subscribed 1.46 times so far; should you invest?

The initial public offer (IPO) of Shyam Metalics and Energy was subscribed 1.46 times on the second day of subscription on Tuesday. The public offer received bids for 3,07,69,740 shares against 2,10,90,890 shares on offer, NSE data showed.

The company on Friday collected Rs 270 crore from anchor investors. The IPO comprises fresh issuance of equity shares worth up to Rs 657 crore and a Rs 252 crore offer for sale by existing shareholders.

Shyam Metalics has set a price band of Rs 303-306 a share for its Rs 909 crore initial public offer (IPO), which will close for subscription on June 16.

The company intends to utilise the net proceeds from the fresh issue for repayment or prepayment of debt worth Rs 470 crore and that of its subsidiary, Shyam SEL and Power Ltd, and for other general corporate purposes.

ICICI Securities, JM Financial, Axis Capital, IIFL Securities and SBI Capital Markets Ltd are the book running lead managers to the issue.

The Kolkata-based long steel products and ferro alloy-focussed company sells intermediate and final products across the steel value chain.

Should you subscribe?

Geojit Financial Services: Subscribe
At the upper price band of Rs 306, SMEL is available at EV/EBITDA of 9.1 times which appears fully priced. Geojit Financial Services assign a ‘Subscribe’ rating, with a short to medium-term perspective due to optimistic international prices and rise in domestic demand.

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 14.6 times with a market cap of Rs 7805.5 crore whereas its peers namely Tata Steel and JSW Steel are quoting at higher PE of 16.6 times and 21.6 times 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.

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 and amortization) multiple of 8.6 times, which is at a premium to the peer average of 6.4 times. Despite factoring in an exponential rise in EBITDA in Q4 FY21, the company still appears to be overvalued in relation to its peers.

Shyam Metalics and Energy listing
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.