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Shyam Metalics and Energy shares shine as Street cheers Mittal Corp acquisition

business | Dec 21, 2022 11:50 AM IST

Shyam Metalics and Energy shares shine as Street cheers Mittal Corp acquisition

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Shyam Metalics and Energy has acquired Mittal Corp and forayed into the stainless steel/ wire rod and bar mill business following which the firm's shares rallied over 8 percent on Wednesday.

Shyam Metalics and Energy’s shares rallied over nine percent on Wednesday after the integrated metal producer concluded its acquisition of Mittal Corp with a foray into the stainless steel/ wire rod and bar mill business. With this acquisition, Shyam Metalics’ manufacturing business would enter into Madhya Pradesh with additional capacities of 1,50,000 tpa of stainless steel/ wire rod and bar mill. It is aimed at expanding existing 8.85 MTPA production capacity to 14.45 MTPA, the firm said in an exchange filing.

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“Ferro Alloys, a key input material for Stainless Steel, is extensively produced by our existing companies. The government has mandated a minimum 20 percent use of stainless steel in coastal areas which ensures a very stable demand for these products,” it said.
Brij Bhushan Agarwal, VC and MD, Shyam Metalics & Energy, told CNBC-TV18 that the plant is functioning but the capacity utilisation is very low and once his firm takes complete control of the plant, it will be run from next year at full capacity. The total acquisition value will be around Rs 450 crore, he added.
In its regulatory filing, the company added that capex spending shall grow to Rs 10,000 crore in the next five years to meet the organic and inorganic growth plans through internal accruals.
“With this development, Shyam Metalics has embarked on a ‘diversification approach’ in the metal space to chart the company’s growth journey and has proposed to further invest Rs 7500 crore over the next five years,” the firm said.
Agarwal said, “Next year onwards, we expect a revenue of somewhere around Rs 2,000 crore of this plan. And down the line in the next two to three years, we will be doubling the capacity in stainless steel. We expect the next three to four years to be more prudent, we should be able to generate a revenue of around Rs 4,000-5,000 crore in the stainless steel segment.” 
The current manufacturing plants in West Bengal and Odisha which employ more than 15,000 people will further see an addition of 10,000 jobs to the entire workforce post expansions, it added.
Agarwal noted that the market is now turning better after the change in the import-export duty withdrawal by the government. It is looking positive and demand seems to be on the better side while margins are increasing because of cooling off coal prices.
SMEL has already invested Rs 2,400 crore out of the Rs 3,950 crore existing capex plan of the company in the last two years. The new investment will also help Shyam Metalics bet big on its exports and expand geographies to newer markets which currently stands at 40+ countries with a contribution of 16 percent to the overall business.
Earlier in 2021, SMEL acquired the aluminum foil metal space and implemented one of India’s largest aluminium foil rolling plant in India in West Bengal. In 2022, the firm also took control of Ramsarup Industries Limited through NCLT which will help facilitate inorganic growth in the steel space.
Shyam Metalics has a very large basket of metal products under one roof. The company produces and sells pellets, sponge iron, billets, TMT rods, wire rods, angles, channels, beams, ferro chrome, ferro silicon, silico manganese, low carbon ferro chrome and aluminium foil products. Post-acquisition and expansions there will be an addition of pig iron, DI pipes, stainless steel/ wire rod and bar mill.
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