Shyam Metalics IPO to fund diversification

Steel Insights Bureau

Shyam Metalics and Energy Ltd (SMEL) is diversifying its product portfolio by entering into segments such as, pig iron, ductile iron pipes and aluminium foil.

The company is a producer of 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 alloys for special steel applications.

The company intends to take its total capacity from 5.71 million tons per annum (mtpa) to 11.60 mtpa.

The company plans to set up ductile iron pipe capacity of 2 lakh tons per annum (ltpa), a blast furnace of 6 ltpa and aluminium foil capacity of 40000 tons per annum as part of its expansion plans, Brij Bhushan Agarwal, Vice Chairman and Managing Director, Shyam Metalics & Energy Ltd said during the launch of the Initial Public Offering.

SMEL has come out with its initial public offering of equity shares at a price band of Rs 303–306 per equity share.

The total issue size is up to Rs 909 crore with a fresh issuance of equity shares, aggregating up to Rs 657 crore and an offer for sale of equity shares aggregating up to Rs 252 crore by the selling shareholders.

The company also proposes to utilise a part of the proceeds from the fresh issue towards repayment of up to Rs 470 crore of its debt and that of its subsidiary, Shyam SEL and Power Ltd.

The company’s key strength lies in its integrated operations across the steel value chain and strategic locations of its manufacturing plants in Odisha and West Bengal which are well connected by railways, roadways and ports in the eastern region of India and are supported by infrastructure in terms of captive railway sidings and captive power plants.

The Group’s manufacturing plants at Sambalpur and Jamuria are forward and backward integrated, and the Group is present across steel value chain, offers a diversified product mix, and has strategic locational advantage.

In the nine months ended December, power units produced from the Group’s captive power plants accounted for 79.58 percent of their total power units consumed.

The Group has a wide distribution network partnered through 42 distributors across 13 states and one union territory in India, as of December 31, 2020.

The Group’s domestic customers include Jindal Stainless Ltd, Jindal Stainless (Hisar) Ltd, and Rimjhim Ispat Ltd and international customers include Norecom DMCC, Norecom Ltd, POSCO International Corp, World Metals & Alloys (FZC), Traxys North America LLC, JM Global Resources and others.

Forward integration

The company’s expansion plans include the proposal to establish a new ductile pipe plant, blast furnace and aluminum foil rolling mill.