Companies

Shyam Metalics to invest ₹2,894 crore in expansion

Shobha Roy Kolkata | Updated on June 16, 2021

Looks to double production capacity

Shyam Metalics and Energy Ltd (SMEL) is looking to double its production capacity at an estimated investment of close to ₹2,894 crore through brownfield expansion at two of its units in the next three-to-four years.

The company has an aggregate metal production capacity of close to 5.7 million tonne (mt) at present. This would be further increased by close to 5.9 mt thereby ramping up the total capacity to around 11.6 mt by 2025.

According to Brij Bhushan Agarwal, Vice-Chairman and Managing Director, SMEL, the entire investment would be funded through internal accruals. Nearly70 per cent of the proposed expansion is expected to come onstream by 2023.

The company currently operates three manufacturing plants that are located at Sambalpur in Odisha, and Jamuria and Mangalpur in West Bengal. The brownfield expansion would be undertaken at its plants in Odisha and Jamuria in West Bengal.

“We have been growing at 22-25 per cent on a year-on-year basis and we expect to maintain the growth momentum given the steady demand for steel in infrastructure, housing and construction segment,” Bhushan said explaining the rationale behind undertaking the expansion.

As per information available in the Draft Red Herring Prospectus, the company had total revenue of ₹439 crore for the year ended March 31, 2020. Its revenues for the quarter ended December 31, 2020 stood at ₹399 crore.

The company’s plants are strategically located on the bed of raw material and hence it is not dependent on international raw material. The products that the company manufactures are usually not imported from other countries but are rather exported and so it has a risk safeguard from the product side as well.

“Both our plants are located close to four ports and we have our own railway siding facility. We are on the bed of raw materials – coal and iron ore and we also have long term contracts for our raw materials,” he said highlighting some of the strengths of the group.

Diversification

The group, which 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, is looking to diversify its product portfolio by entering into the segments, such as, pig iron, ductile iron pipes and aluminium foil.

The proposed cold rolling mill for manufacturing aluminium foils will have a capacity of around 40,000 tonne per annum and is expected to be completed by the end of FY-22.

According to Agarwal the aluminium foil business would offer good margins thereby contributing to the profitability of the group.

The company is hopeful of growing its exports backed by a steady demand from international markets. Exports currently account for 12-15 per cent of its total business. It currently exports to Nepal, Bhutan, Bangladesh, China, Japan and Dubai.

Published on June 16, 2021

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