Choice Equity Broking has come out with its report on Shyam Metalics and Energy. The research firm has recommended to ”Subscribe” the ipo in its research report as on June 09, 2021.
Broker Research
June 14, 2021 / 10:50 AM IST
IPO (Representative image)
Choice Equity Broking IPO report on Shyam Metalics and Energy
Integrated metal producing company Shyam Metalics and Energy Ltd. (SMEL), is planning to raise up to Rs. 909cr through an IPO, which opens on 14th Jun. and closes on 16th Jun. 2021. The price band is Rs. 303 – 306 per share. The issue is a combination of fresh issue and OFS. The company will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, Rs. 470cr will be utilized to repay or prepayment of debt availed by the company. Residual funds will be used for general corporate purposes. The company reduced the OFS size to Rs. 252cr, as against earlier plan of Rs. 452cr. The probable reason behind the same could be the prevailing higher valuation of the metal stocks. However, the fresh issue remain unchanged to Rs. 657cr.
Valuation and Outlook
At higher price band of Rs. 306, SMEL is demanding a TTM EV/EBITDA multiple of 8.6x, which is at 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. With favorable macros for steel consumption, cautious view on the international steel prices and higher demanded valuation, we assign a “Subscribe with Caution” rating for the issue.
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