Shyam Metalics' smashing debut

Shyam Metalics, as expected, made a smashing debut on the bourses today. The IPO, which was priced at Rs.306, got listed on the BSE at Rs.367, a premium of 20%; it also rose to Rs.399 and is now trading at Rs.382.

The IPO of Shyam Metalics was subscribed over 120 times with retail subscription at 11.58 times, Qualified Institutional Buyers(QIBs) category was subscribed 155.71 times while non-institutional investors 339.98 times.

In our New Issue Analysis, we had said, “Shyam Metalics’ low leverage coupled with steel up cycle may lead to market attraction for the IPO. However, if one wants to ride the steel up cycle, leverage is not the most competitive advantage, as most peers have reported significant debt reduction in FY21 which is likely to continue into FY22. Instead, raw material integration is vital and hence makes sense to go with a large and fully backward integrated player like SAIL which is also ruling at much lower PE multiple of around 3x, unlike semi-integrated Shyam at PE of +7x. Such mid-sized steel companies do well as long as sector cycle is on an uptrend, which is the case now. It is meaningless to invest in such grossly expensive IPO, where the burden will be carried by new investors once sector cycle turns the trend.”