JG Chemicals IPO Review

J.G. Chemicals is India’s largest zinc oxide manufacturer and is also venturing in Zinc sulphate. JG Chemicals IPO entails to raise Rs 251.19 crores. The IPO is a combination of a fresh issue of Rs 165 crore and an offer for sale of Rs 86.19 crore,

IPO opensMarch 5, 2024
IPO ClosesMar, 7, 2024
IPO Size (Rs.)₹251.19 Cr
IPO Size (shares)11,366,063 shares
BreakupFresh issue ₹165.00 Cr+ OFS ₹86.19 Cr
Face Value:₹ 5
IPO Price in Rs :₹210 to ₹221 per share
Minimum Lot
Listing AtNSE, BSE
NII Quota~15%
Retail Quota~35%
 Lead ManagerCentrum Capital, Emkay Global Financial Services, Keynote Financial Services

About JG Chemicals:

  • The Company was initially formed as a partnership firm in 1975 in West Bengal.
  • It was converted to “J.G. Chemicals Pvt Ltd” in 2001 and subsequently the name was Changed to “J.G. Chemicals Ltd” in 2022.
  • J.G. Chemicals is India’s largest zinc oxide manufacturer in terms of production and revenue for zinc oxide manufacturing through the French process and had a market share of ~30% as of March 2022.
  • The company sells over 80 grades of zinc oxide and is among the top 10 manufacturers of zinc oxides globally.
  • As on Dec. 31, 2023, the company’s aggregate installed capacity is of 77,040 MTPA.
  • It has three manufacturing facilities at Jangalpur and Belur in West Bengal, and Naidupeta, Andhra Pradesh.
  • The Naidupeta plant in AP which is the largest manufacturing facility is owned and operated by the company’s material subsidiary BDJ Oxides, and is the only zinc oxide manufacturing facility in India to have an IATF certification.
  • As on December 31, 2023, the company’s aggregate installed capacity stood at 77,040 MTPA which includes an installed capacity of 59,904 MTPA for zinc oxide, 7,056 MTPA for zinc ingots and 10,080 MTPA capacity for zinc sulphate and other allied chemicals.

Financials: JG Chemicals IPO

Particulars / Rs. Cr2023 (06)2023 (12)2022 (12)2021 (12)
Revenue from operations486.32784.58612.83435.3
Total Income491.1794.19623.05440.41
EBITDA Margin (%)6.77%10.85%10.83%11.17%
PAT Margin (%)3.81%7.24%7.04%6.62%
Share Capital31.7231.721.221.22
Net Worth217.86199.89147.66108.48
Operating Cash Flows67.1131.176.75-7.35
Net Debt as stated-70.91-42.15-3.96-13.62
Debt Equity Ratio (x)0.110.340.620.69
ROCE (%)11.86%29.38%25.83%25.27%
ROE (%)8.20%30.50%30.64%24.23%
Post issue Share Capital39.18   
IPO price221.0   
EPS Fy2314.5   
PE Fy2315.2   
EPS Fy24 (annualized)9.4   
PE Fy24  (annualized)23.4   
Market cap in Lacs865.9   
Market cap / Sales1.10   

JG Chemicals IPO: Anchors

JG Chemicals IPO: Salient Points

  • The company’s products cater to a wide range of industrial applications, including in the rubber (tyre & other rubber products), ceramics, paints & coatings, pharmaceuticals & cosmetics, electronics & batteries, agro chemicals & fertilizers, speciality chemicals, lubricants, oil and gas and animal feed.
  • Tyre industry companies are the largest consumers of the company’s product. Apart from being a supplier to 9 out of top 10 global tyre manufacturers and to all of the top 11 tyre manufacturers in India, the company also supplies to leading paints manufacturers, footwear players and cosmetics players in India.
  • Currently, 90.5% of revenue comes from the Tyre and Rubber industry.
  • As part of the OFS, Vision Projects & Finvest Pvt., Suresh Kumar Jhunjhunwala (HUF), Anirudh Jhunjhunwala and Jayanti Commercial Ltd. will offload equity shares.
  • From the fresh Issue of Rs. 165 cr , an amount of Rs. 95 cr is earmarked for working capital , Rs. 25 cr to repay entire debt and) Rs. 6 cr for R&D.
  • Outlook for some major user industries of zinc oxide in India
User industriesOutlook CAGR FY23- FY27E
  • Peers
CompanyCMP (₹)Revenue(cr)Net Profit(₹ cr)NPM %PEMacp/salesRONW%
Rajratan Global Wire629898.710011.1%44.43.6722.79%
NOCIL Limited2591622.81499.2%362.919.61%
Yasho Industries1,936682.6649.4%39.93.8928.52%
  • The company operates a GMP-approved plant specifically tailored for the Pharma industry, producing higher-quality Zinc Oxide with better profit margins.
  • The company is poised to meet the demand for Zinc Carbonate used in the Electronics.
  • Majority of its revenues come from Zinc oxide. To diversify its revenue base, the company has ventured into the production of Zinc Sulphate, with a capacity of 10,000 MTPA.
  • There is good demand for this product in the agro-chemical, pharma industry.
  • Recently, the company augmented its 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 other related chemicals.
  • There are plans to establish a new manufacturing facility in Gujarat. The company desires extending its presence to the western part of India, to enhance manufacturing capabilities and cater to ceramics, pharmaceuticals, and tyre industries prevalent in this region.
  •  Clientele is reputed and includes Apollo Tyres Ltd, MRF Ltd, and Ceat Tyres, from which the group receives repeat orders. It has maintained a 90% repeat order rate.
  • JG Chemicals IPO is coming at a PE ratio of 15.2x(fy23 earnings) and 23x ( fy24 annualized earnings).
  • I intend to apply in JG Chemicals IPO subject to availability of funds. As per management there was short term impact on margins in H1Fy24. The company is among the top ten manufacturers globally for Zinc oxide whose usage in increasing in industries other than tyre as well. I have a slightly positive view on the company despite a poor H1Fy24 and in my view the company holds reasonable promise. Mainline IPOs have recently witnessed tepid listings and one should not have high expectations from such primary offerings.
  • GMP as reported on social media has been Rs. 50
  • Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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