Street signs: Shyam GMP at 35%, demand recovery to aid Power PSUs & more

Shyam GMP at 35%; Sona’s at 10%

The grey market premium (GMP) for Shyam Metalics and Energy is 35 per cent, while that for Sona BLW Precision Forgings is less than 10 per cent, said people in the know. The two IPOs are hitting the market after a gap of more than two months. “The valuation of Shyam Metalics is at a discount to listed peers, such as Tata Steel and JSW Steel. As a result, there is an upside potential,” said an analyst. The price band for the Shyam Metalics IPO is Rs 303-306 per share. At the top end, the firm will have a market cap of Rs 7,806 crore. Sona BLW’s price band is Rs 285-291. At the top end, the company will be valued at 79x its adjusted earnings in FY21 and will have a market cap of Rs 16,974 crore, said analysts.

Massive passive buying in Tata Steel

Tata Steel is expected to see huge inflows from ETFs over the next week. The stock was added to the benchmark Sensex and also on the FTSE’s global index. Sriram Velayudhan, V-P, IIFL Securities in a note said Tata Steel will see inflows of $119 million on account of Sensex inclusion and another $82.5 million on account of the FTSE inclusion. The cumulative buying would be nearly Rs 1,500 crore ($201.5 million).  The rebalancing will play out on June 18, he said. Already savvy investors have built long positions in anticipation of these flows. On Friday, the stock rose 4.4 per cent.

Demand recovery to aid Power PSUs

Public sector undertakings (PSUs) operating in the power sector may gain on the back of a recovery in demand. NTPC, PTC India, and Coal India are some of the stocks that are likely to benefit, say analysts. They said demand is witnessing a reversal towards the peak levels of March 2021 amid the decline of the Covid second wave. Moreover, demand increase has occurred in the northern region, which is witnessing peak summer temperatures and increased economic activities due to considerable lifting of lockdowns. " Several stocks have rerated but some are still below their book values, especially PSU stocks, on which we remain positive. Central PSUs have consistently given strong core performance over the past few quarters, and their earnings growth remains robust,” said a note by ICICI Securities. Stocks of private sector power firms such as Tata Power, CESC and JSW Energy have done well recently.