JG Chemicals Ltd
Shaping Industries with Zinc Oxide Innovations
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JG Chemicals Ltd
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Shaping Industries with Zinc Oxide Innovations
Established in 1975, JG Chemicals Limited (JCL) specializes in zinc oxide Industry Chemicals
manufacturing through the French process, offering a diverse range of
over 80 grades of zinc oxide. The company's zinc oxide finds applications Issue Details
across various industries such as ceramics, paints and coatings, Listing BSE & NSE
pharmaceuticals and cosmetics, electronics and batteries, Open Date 5th Mar 2024
Close Date 7th Mar 2024
agrochemicals and fertilizers, specialty chemicals, lubricants, oil and gas,
Price Band INR 210-221
and animal feed.
Face Value INR 10
Operating three manufacturing facilities located in Jangalpur and Belur,
Market Lot 67 shares
both in Kolkata, West Bengal, and Naidupeta in Nellore District, Andhra
Minimum Lot 1 Lot
Pradesh, with Naidupeta being the largest facility owned by the Material
subsidiary. All these facilities hold certifications, including ISO
45001:2018 and ISO 14001:2015, and accreditation under ISO 9001:2015. Issue Structure
Fresh Issue 65.68%
With a commitment to quality, the company has successfully met the OFS 34.32%
requirements of over 200 local and 50 international customers spanning Issue Size (Amt) INR 251.19 cr
more than 10 countries. As of December 31, 2023, the company's Issue Size 1,13,66,063
(Shares)
workforce comprised 112 permanent employees, along with over 100
QIB Share (%) ≤ 50%
workers and apprentices.
Non-Inst Share ≥ 35%
(%)
JCL’s proposed issue size is INR 251.19 cr out of which INR 165 cr is fresh Retail Share (%) ≥ 15%
issue. The proposed fresh issue will be utilized for
Pre issue sh (nos) 3,17,20,000
1. Investment in its Material Subsidiary, viz. BDJ Oxides (i) repayment or Post issue sh 3,91,86,063
pre-payment, in full or in part, of all or certain borrowings availed by its (nos)
Material Subsidiary; (ii) funding capital expenditure requirements Post issue M Cap 864.1 cr
for setting up of a research and development centre situated in
Naidupeta, Andhra Pradesh (“R&D Centre”); Shareholding Pre Post
and (iii) funding its long-term working capital requirements; (%) (%) (%)
2. Funding long-term working capital requirements of our Company; and Promoter 100.0 71.0
3. General corporate purposes. Public 0.0 29.0
TOTAL 100 100
At the IPO price of INR 221 (upper price band), JCL is valued at P/E of
15.7x.
Key Financial Data (INR Cr, unless specified)
EBITDA PAT Adj BVPS RoE ROCE P/E EV/Sales EV/EBITDA
Revenue EBITDA PAT
(%) (%) EPS (₹) (₹) (%) (%) (X) (X) (X)
FY21 435.3 42.0 28.8 9.6 6.6 6.0 27.7 21.6 15.2 36.9 2.1 22.2
FY22 612.8 56.7 43.1 9.3 7.0 10.2 39.0 26.2 16.5 21.6 1.6 16.8
FY23 784.58 74.1 56.8 9.5 7.2 14.1 53.1 26.5 18.8 15.7 1.2 12.5
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Growth Strategies
The company aims to enhance production capacities and expand its
manufacturing footprint.
The company, with existing manufacturing units in the eastern and southern
regions of India, is focused on expanding production capacities and diversifying
manufacturing operations. Recently, the company augmented its Naidupeta
facility in Andhra Pradesh, adding 23,520 MTPA. Of this, 13,440 MTPA is designated
for zinc oxide, and 10,080 MTPA for zinc sulphate and related chemicals. The
cumulative installed capacity, including subsidiaries, now stands at 77,040 MTPA.
In addition to this expansion, there are plans to establish a new manufacturing
facility in Gujarat. The company anticipates that this move, extending its presence
to the western part of India, will not only boost manufacturing capabilities but also
facilitate market share growth by catering to the ceramics, pharmaceuticals, and
tyre industries prevalent in the region.
Strategic Product Diversification and Growth Initiatives
To diversify its product offerings, the company has ventured into the production
of Zinc Sulphate, with a capacity of 10,000 MTPA, in response to the growing
demand in the agro-chemical industry. Utilizing Zinc Ash, a byproduct of Zinc
Oxide, contributes to cost reduction and margin expansion. The company
operates a GMP-approved plant specifically tailored for the Pharma industry,
producing higher-quality Zinc Oxide with increased profit margins. Additionally,
the company is poised to meet the demand for Zinc Carbonate in the Electronics
segment.
High Entry Barriers
The company faces high entry barriers, particularly in the tyre manufacturing
sector, where quality is paramount and established suppliers are preferred. JG
Chemicals distinguishes itself with IATF certification and pharmaceutical licenses,
positioning itself for industry growth. Despite challenges in the zinc oxide
industry, the company adeptly navigates them through a global supplier base and
customized product offerings. Strong relationships with suppliers and customers
contribute to its competitive advantage, and the absence of import issues from
China further strengthens its market position.
Deep mining of existing customers and continued focus to expand customer
base
Over the years, the company has emerged as a preferred supplier for numerous
global and domestic tire companies. These companies are progressively
transitioning towards establishing a local vendor base to reduce dependence on
imports and streamline inventory management. Recognizing the significance of
having a local manufacturing presence in key South-East Asian countries,
particularly strongholds of tire manufacturers, the company aims to fulfill sourcing
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needs for existing customers. Leveraging its extensive global footprint and
accumulated experience, the company seeks to extend the reach of its specialty
products to current customers, thereby expanding wallet share and achieving
deeper market penetration.
Key Risks & Concerns
• The business relies heavily on the sale of a single core product, namely zinc
oxide in different grades. Any decrease in demand for this product could
potentially negatively impact the business and its financial performance.
• Their business heavily relies on the operational performance of their
material subsidiary, BDJ Oxides Private Limited. Any decline in the
subsidiary's performance could have adverse repercussions on their
business, financial standing, and operational outcomes.
• They derive a significant portion of their revenue from specific customers. If
one or more of these customers decide not to obtain their requirements
from them, it could adversely impact their business, financial status, and
operational results
Issue Structure and Offer Details
The proposed issue size of JG Chemicals Ltd IPO is INR 251.19 cr (fresh issue of 165
cr and OFS of 86.19 cr) and the price band for the issue is in the range of INR 210-
221 and the bid lot is 67 shares and multiples thereof.
Issue Structure
Investor Category Allocation
QIB Not more than 50% of the Net Issue
NIB Not less than 15% of the Net Issue
Retail Not less than 35% of the Net Issue
Number of shares based on a higher price band of INR 221
Source: Company Reports
Details of the selling shareholders
Promoter Selling shares Amount offered No of shares
Vison Projects and Finvest Not more than 44.8 Cr 20,28,900
Pvt Ltd
Jayanti Commercial Ltd Not more than 0.02 Cr 1,100
Suresh Jhunjhunwala Not more than 27.85 Cr 12,60,000
Anirudh Jhunjhunwala Not more than 13.48 Cr 6,10,000
The amount is based on a higher price band of INR 221
Source: Company Reports
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Company’s financial summary and analysis
Fig in INR Cr (unless specified) FY21 FY22 FY23 Fig in INR Cr (unless specified) FY21 FY22 FY23
Income Statement Per share data & Yields
Revenue 435.3 612.8 784.6 Adjusted EPS (INR) 6.0 10.2 14.1
YoY Growth (%) 9.0 40.8 28.0 Adjusted Cash EPS (INR) 6.6 10.9 14.9
Employee Cost 10.3 13.3 14.8 CFO Yield (%) (0.9) 0.8 3.6
Employee Cost to Sales (%) 2.4 2.2 1.9 Adjusted FCF per share (INR) (2.3) 0.8 6.5
Other Expenses 34.0 47.0 61.6 FCF Yield (%) (1.0) 0.4 2.9
Other Exp to Sales (%) 7.8 7.7 7.8
EBITDA 42.0 56.7 74.1 Solvency Ratio (X)
Margin (%) 9.6 9.3 9.5 Total Debt to Equity 0.7 0.6 0.3
YoY Growth (%) 118.8 35.0 30.7 Net Debt to Equity 0.6 0.6 0.3
Depreciation & Amortization 2.3 2.7 3.4 Net Debt to EBITDA 1.7 1.5 0.9
EBIT 39.7 54.0 70.7
Margin (%) 9.1 8.8 9.0 Return Ratios (%)
YoY Growth (%) 128.8 36.3 30.9 Return on Equity 21.6 26.2 26.5
Other Income 6.9 10.2 11.3 Return on Capital Employed 15.2 16.5 18.8
Bill discounting & other charges 5.3 6.8 5.4 Return on Invested Capital 22.3 70.7 74.1
Fin Charges Coverage (X) 7.4 7.9 13.2
Exceptional Item 0.0 0.0 0.0 Working Capital Ratios
PBT 41.2 57.4 76.7 Payable Days (Nos) 6 3 4
Margin (%) 9.5 9.4 9.8 Inventory Days (Nos) 41 53 48
YoY Growth (%) 115.6 39.4 33.5 Receivable Days (Nos) 75 56 54
Tax Expense 12.4 14.3 19.9 Net Working Capital Days (Nos) 110 106 98
Tax Rate (%) 30.1 24.9 25.9 Net Working Capital to Sales (%) 30.1 29.0 26.9
PAT 28.8 43.1 56.8
Margin (%) 6.6 7.0 7.2 Valuation (X)
YoY Growth (%) 106.4 49.7 31.7 P/E 36.9 21.6 15.7
Min Int/Sh of Assoc (5.4) (3.1) (1.9) P/BV 8.0 5.7 4.2
Net Profit 23.4 40.0 54.9 EV/EBITDA 22.2 16.8 12.5
Margin (%) 5.4 6.5 7.0 EV/Sales 2.1 1.6 1.2
YoY Growth (%) 80.9 70.7 37.3
Cash Flow Statement
Balance Sheet PBT 41.2 57.4 76.7
Share Capital 1.2 1.2 31.7 Adjustments 2.7 10.1 7.7
Total Reserves 107.3 151.4 175.9 Change in Working Capital (38.8) (46.5) (33.4)
Shareholders Fund 108.5 152.6 207.7 Less: Tax Paid (12.4) (14.3) (19.9)
Long Term Borrowings 5.5 5.6 6.7 Cash Flow from Operations (7.3) 6.8 31.2
Deferred Tax Assets / Liabilities 0.1 (0.0) 0.6 Net Capital Expenditure (5.3) (8.7) (9.9)
Other Long Term Liabilities 0.2 0.0 0.0 Change in Investments (0.3) 3.3 5.0
Long Term Trade Payables 0.0 0.0 0.0 Cash Flow from Investing (5.6) (5.4) (4.9)
Long Term Provisions 0.2 0.2 0.3 Change in Borrowings 22.3 11.7 (23.2)
Total Liabilities 114.5 158.4 215.2 Less: Finance Cost (5.3) (6.8) (5.4)
Net Block 23.0 22.4 35.3 Proceeds from Equity 0.0 0.0 0.0
Capital Work in Progress 0.0 7.4 0.9 Buyback of Shares 0.0 (5.1) 0.0
Intangible assets under development 0.0 0.0 0.0 Dividend Paid 0.0 0.0 0.0
Non Current Investments 8.6 8.5 3.0 Cash flow from Financing 17.0 (0.2) (28.6)
Long Term Loans & Advances 2.3 1.7 1.8 Net Cash Flow 4.0 1.1 (2.3)
Other Non Current Assets 0.4 0.4 0.5 Forex Effect 0.0 0.0 0.0
Net Current Assets 80.1 118.0 173.8 Opening Balance of Cash 0.7 4.7 5.9
Total Assets 114.5 158.4 215.2 Closing Balance of Cash 4.7 5.9 3.5
Source: Ventura Research
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