Shyam Metalics & Energy Limited's material wholly-owned subsidiary, Shyam Sel and Power Limited (SSPL), has made a strategic move into the renewable energy sector. The company has acquired a 26% equity stake in Emerge Solar Projects Private Limited for ₹25.00 lakh, marking a significant step towards sustainable energy practices.

Acquisition Details

The acquisition involved the allotment of 2,600 equity shares of Emerge Solar Projects Private Limited. Each share was priced at a face value of ₹10 with a premium of ₹951.54 per share, bringing the total investment to ₹25.00 lakh.

Strategic Implications

This strategic investment serves multiple purposes for SSPL:

1. Captive User Status: The acquisition enables SSPL to qualify as a captive user under the Electricity Act, 2003. This status allows the company to access preferential tariffs for power consumption.

2. Cost Reduction: By gaining access to preferential tariffs, SSPL aims to reduce its overall energy costs, which is crucial for its energy-intensive industrial operations.

3. Improved Profitability: The company expects this move to positively impact its EBITDA margins by lowering energy expenses.

4. Environmental Goals: The investment aligns with the company's environmental objectives by increasing its usage of renewable energy sources.

About Emerge Solar Projects

Emerge Solar Projects Private Limited is a newly incorporated Indian company, established in March 2024. The company's primary objective is to set up solar power generation units. It's worth noting that Emerge Solar Projects has not yet commenced its business operations.

Future Outlook

This acquisition represents a forward-thinking approach by SSPL to address both economic and environmental concerns. By reducing its dependence on grid power and embracing solar energy, the company is positioning itself for potential long-term benefits in terms of cost savings and sustainability.

The move also reflects a growing trend in the industrial sector towards adopting renewable energy solutions to mitigate rising energy costs and meet environmental responsibilities.

As Emerge Solar Projects begins its operations and develops its solar power generation capabilities, it will be interesting to observe how this partnership evolves and impacts SSPL's energy strategy in the coming years.

Shyam Metalics & Energy has delivered a robust performance in the first quarter, showcasing strong growth across key financial metrics. The company's strategic focus on operational efficiency and product diversification has yielded positive results amid ongoing global economic challenges.

Financial Highlights

• Revenue surged by 22% year-on-year to Rs. 4,490.00 crores
• Operating EBITDA increased by 19% to Rs. 580.00 crores, with a margin of 13.12%
• Profit After Tax (PAT) grew by 5.3% to Rs. 291.00 crores
• Volume growth was notable at 32% year-on-year

Operational Performance

The company's newly commissioned facilities have shown impressive utilization rates:

• Blast furnace achieved 104% utilization
• Color-coated unit reached 70% utilization

Brij Bhushan Agarwal, Chairman and Managing Director, commented, "Our blast furnace facility is currently operating at more than 120% rating, which is unparalleled in the Indian industry. We've implemented the best technologies and conducted extensive R&D in setting up this plant."

CAPEX and Expansion Plans

Shyam Metalics has made significant progress in its capital expenditure plans:

• Incurred Rs. 7,003.00 crores in CAPEX, representing 70% of total planned expenditure
• Rs. 4,900.00 crores have been capitalized
• Most carbon steel CAPEX expected to be operational by FY26
• Stainless steel and aluminum projects on track for FY27 commissioning

The company has also declared an interim dividend of Rs. 1.80 per share, amounting to an outgo of Rs. 52.24 crores.

Future Outlook

Despite ongoing geopolitical challenges, Shyam Metalics remains optimistic about maintaining its growth trajectory. The management expects to sustain an annual CAGR of around 15% and anticipates EBITDA margins to remain between 11-13%.

Deepak Agarwal, Director of Finance, stated, "We expect a reasonably strong demand recovery on the back of recent policy announcements made by the government towards railway, roadways, civil aviation, gas pipeline, and affordable housing sectors."

Diversification and Value Addition

The company continues to focus on diversification into high-value products:

• Expanding aluminum foil capacity and moving into downstream value-added products
• Stainless steel segment targeting Rs. 5,500.00-6,000.00 crores top line in the next 2-3 years
• Evaluating opportunities in coal mining to enhance operational efficiency

Shyam Metalics' strategic investments and focus on operational excellence position it well for sustained growth in the coming years, as it continues to expand its presence in the metal sector with a debt-free balance sheet and strong cash flows.