JG Chemicals IPO: Overview, Key Details, Financials, KPIs, Strengths, and Weaknesses
In today’s blog, we will uncover the details of JG Chemicals, a specialty chemical company that is coming up with an IPO and is engaged in manufacturing zinc oxide.
Let’s start with a deep analysis of the company’s finances, details of the issue, strengths, and weaknesses.
Company Overview
Established in 1975, the enterprise is involved in the production of zinc oxide through the utilization of French technology. The company’s founders have over 50 years of combined expertise.
In 1975, the business began operations in Kolkata with a small facility with a capacity of about 600 MTPA.
The company’s clientele is dispersed across the globe; 200 of them are in India, while the remaining 50 are distributed across 10 nations. As of December 2023, the company’s total installed manufacturing capacity was 77040 MTPA. Its manufacturing facilities are located all throughout the nation, with the largest being at Naidupeta, Andhra Pradesh, and Jangalpur, Kolkata. The company employs 112 full-time employees and 47 contract workers.
Promoters
Suresh Jhunjhunwala, Anirudh Jhunjhunwala, and Anuj Jhunjhunwala are the company’s promoters and own 100% of the company.
Details of the Issue
To raise INR 251.19 crore, JG Chemical is planning an IPO, which combines an offer for sale and a fresh issue. Of the total, INR 165 crores will be a fresh issue and INR 86.19 crores will be an offer for sale. 67 shares make up the market lot for the IPO, with an upper and lower price range of INR 221 and INR 210, respectively.
The major details are as follows:
| Face Value of Share | INR 10 Rs |
| Price Band | INR 210 to INR 221 per share |
| Market Lot | 67 Shares |
| Total Fresh Issue Size | 165 Crores |
| Total Offer for Sale | 86.19 Crores |
Timeline of IPO
| IPO Open Date | 5th March 2024 |
| IPO Close Date | 7th March 2024 |
| Finalization of Allotment | 11th March 2024 |
| Initiation of Refund & Credit of shares into demat account | 12th March 2024 |
| Listing Date on NSE & BSE | 13th March 2024 |
IPO Allotment Size
| Applicant | Market Lot | Share | Amount (INR) |
| Retailer (Min) | 1 | 67 | 14,807 |
| Retailer (Max) | 13 | 871 | 1,92,491 |
| Small High Net Worth Individual (Min) | 14 | 938 | 2,07,298 |
| Small High Net Worth Individual (Max) | 67 | 4,489 | 9,92,069 |
| Big High Net Worth Individual (Min) | 68 | 4,556 | 1,00,68,876 |
Objective of the Issue
The company plans to use the issue proceeds to establish a research facility in Naidupeta, Andhra Pradesh, prepay a portion of its debt, and invest in its subsidiary companies through BDJ oxides. Additionally, a portion of the earnings will be used to finance their working capital.
Financial Highlights
Balance Sheet
| Particulars | 31st March 2023 | 31st March 2022 | 31st March 2021 |
| Non-Current Assets | 41.455 | 40.426 | 34.364 |
| Current Assets | 256.335 | 223.715 | 175.572 |
| Total Assets | 297.790 | 264.141 | 209.937 |
| Total Equity | 213.528 | 156.638 | 119.004 |
| Non-Current Liabilities | 7.589 | 5.833 | 5.976 |
| Current Liabilities | 76.673 | 101.670 | 84.956 |
Income Statement
| Particulars | 31st March 2023 | 31st March 2022 | 31st March 2021 |
| Revenue from Operations | 784.576 | 612.830 | 435.298 |
| Total Income | 794.188 | 623.047 | 440.405 |
| Total Expenses | 717.495 | 565.601 | 399.206 |
| Profit before tax | 76.694 | 57.446 | 41.199 |
| Profit after tax | 56.793 | 43.126 | 28.799 |
Cash Flow Statement
| Particulars | 31st March 2023 | 31st March 2022 | 31st March 2021 |
| Net Cash flow from operating activities | 31.166 | 6.752 | (7.346) |
| Cash flow from investing activities | (4.897) | (5.415) | (5.60) |
| Cash flow from financing activities | (28.574) | (0.190) | 16.955 |
KPIs
| Particulars | 31st March 2023 | 31st March 2022 | 31st March 2021 |
| EBITDA Margin | 10.85% | 10.83% | 11.17% |
| Return on Equity (ROE) | 30.50% | 30.64% | 24.23% |
| Debt Equity Ratio | 0.34 | 0.62 | 0.69 |
| Profit after Tax Margin | 7.24% | 7.04% | 6.62% |
| Return on Capital Employed (ROCE) | 29.38% | 25.83% | 25.27% |
Based on the 17.32 EPS for the fiscal year that ended in 2023, the PE on the upper price band comes out to be 12.75x, while the PE on the lower price band comes out to be 12.12x.
Strengths
1. The company has a monopoly in this industry because it is the only one in India producing zinc oxide.
2. The industry is protected from competition by having an extremely high entry barrier.
3. The company’s operating cash flow has expanded dramatically over the past year. In FY2022, OCF stood at 6.752 crores; by FY2023, it was 31.166 crores.
4. The company’s promoters have over 50 years of experience in this industry, and their expertise helps them achieve new heights.
Weaknesses
1. The company’s main product is zinc oxide. Therefore, any decline in demand could harm the company’s bottom line.
2. Since their profit after-tax margin has been stable over the last three years, any increase in input costs could hurt their profit margins.
3. Given that the price of zinc oxide had a global correction in 2021, any additional price correction may affect their performance.
4. The company’s business operations depend on the performance of its subsidiary, BDJ Oxides Private Limited; any decrease in the subsidiary company’s performance would have a detrimental impact on its operations.
Conclusion
JG Chemical has a monopoly in the zinc oxide market, and the company’s main goals in raising money include paying off debt and investing in its subsidiary businesses. Nearly all of the world’s leading tire manufacturers are served by the company. The business’s performance is evident in its financial statements, where sales have grown by over 28% Y-o-Y, and profit has surged by 31% Y-o-Y.
However, before making any investment decisions, investors are advised to carefully review all of the risk considerations associated with this initial public offering (IPO) and to keep their risk tolerance in mind.
Frequently Asked Questions (FAQs)
Q1. When will JG Chemical IPO list?
Ans. The listing date of the JG chemical IPO is 13th March 2024.
Q2. What is the cut-off price of the JG Chemical IPO?
Ans. The upper price band of 221 INR will be the cutoff price of the IPO.
Q3. What does JG Chemical do?
Ans. JG Chemical manufactures zinc oxide. Their products are used in industrial applications such as rubber tires, ceramics, paints & coatings, etc.
Q4. What is the market lot size of JG chemical IPO, and what will be the minimum amount required by an individual?
Ans. The market lot of JG Chemical IPO is 67 shares, and the minimum investment amount required by a retail investor is 14,807 INR.
Q5. What is the promoter holding before the issue of the IPO?
Ans. The promoters hold a 100% stake in the company before the issue of the IPO.
Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.
