Shares of an iron and steel company fell nearly 7 percent on Monday’s early trades to reach an intraday low of ₹ 436.60 apiece on the National Stock Exchange (NSE) after its promoters said that they would be selling a 6.3 percent stake in the company via an offer for sale (OFS). At 10:28 AM, its shares were trading at ₹ 453.10 apiece.
According to an exchange filing, Narantalk Dealcomm Limited and Subham Buildwell Private Ltd, promoters of Shyam Metalics and Energy Ltd have proposed to sell up to 1,30,43,480 shares of the company representing 5.11 percent of the total issued and paid-up share capital of the company on September 11, 2023 (T day) for non-retail investors only, and on September 12, 2023 (T+1 day) for both retail investors and non-retail investors who choose to carry forward their un-allotted bids. Moreover, they will have an option to additionally sell up to 30,43,477 equity shares, representing 1.19 percent of the share capital of the company.
The floor price of the offer has been set at ₹ 414 per share, which is an 11.7 percent discount on Friday’s closing price.
Shyam Metalics is a leading integrated metal-producing company with a focus on long steel products and ferroalloys. It is one of the largest producers of ferroalloys in terms of installed capacity in India and has the ability to sell intermediate and final products across the steel value chain.
The company’s promoters held an 88.35 percent stake in the company as per the company’s shareholding pattern as of the June quarter. Shyam Metalics is engaged in a capacity expansion with a total capex plan of ₹ 6,515 crore. The company has already spent ₹ 868 crore in capex. It reported an operating profit of ₹ 1486 crores.
Domestic brokerage ICICI Securities has maintained a buy recommendation on the stock with a price target of ₹ 690. This represents an upside of 52.28 percent as compared to its current share price. It believes that the new capex is likely to result in additional EBITDA of ₹ 1,000 crore. It expects the company to report an operating profit of ₹ 4,000 crores in the financial year 2028.
With a market capitalization of ₹ 11,929 crores, Shyam Metalics is a small-cap company. It has a low return on equity of 13.26 percent and an ideal debt-to-equity ratio of 0.16. Its shares were trading at a price-to-earnings ratio (P/E) of 17.54, which is lower than the industry P/E of 23.51, indicating that the stock might be undervalued as compared to its peers.
Written by Simran Bafna
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