IPO Review - Shyam Metalics & Energy Ltd - ICICI Direct

Shyam Metalics and Energy (SMEL) is a leading integrated metal producing company based in India with a focus on long steel products and ferro alloys. SMEL currently operate three manufacturing plants in Sambalpur in Odisha, along with Jamuria and Mangalpur in West Bengal. SMEL has the ability to sell intermediate and final products across the steel value chain. The company is among the largest producers of ferro alloys in terms of installed capacity in India, as of February 2021. As of March 31, 2020, SMEL was also one of the leading players in terms of pellet capacity and the fourth largest player in the sponge iron industry in terms of sponge iron capacity in India.

Investment Rationale

Integrated operations across steel value chain...

SMEL's Sambalpur and Jamuria plants operate as 'ore to metal' integrated steel manufacturing plants and comprise captive railway sidings, captive power plants, iron pellet, sponge iron, billet, thermo mechanically treated (TMT), wire rod and structural mills, and ferro alloy plants. The integrated nature (backward and forward integration) of the manufacturing plants has resulted in control over all aspects of the operations (with the exception of sourcing of primary raw materials) as well as operating margins, thereby enabling the company to focus more on quality and create multiple points of sale across the steel value chain.

Strategically located manufacturing plants...

The company's manufacturing plants are strategically located in close proximity to raw material sources, which will lower transportation costs and provide significant logistics management and cost benefits thereby improving operating margins. The manufacturing plants are located within 250 km of the mineral belt in eastern India, including, iron ore, iron ore fines, manganese ore, chrome ore and coal mines, which are primary raw materials. The strategic location of the manufacturing plants has helped in creating synergies as well as in achieving economies of scale and operational efficiencies. Further, the manufacturing plants are well connected by roads, railways and ports.

For details, click on the link below: Link to the report

Source : Equity Bulls

Keywords