In India’s red hot IPO market, new opportunities continue to beacon and this time, there is an interesting IPO from the chemical space. The opportunity that has garnered significant attention is JG Chemicals IPO which will mark public market entry of India’s leading zinc oxide manufacturer. With the company poised to enter the public market, here are the top things to know about JG Chemicals IPO.
#1 JG Chemicals IPO: Leadership in Zinc Oxide Market
JG Chemicals has established itself as the undisputed leader in the zinc oxide market, commanding an impressive 30% market share in India in terms of both production and revenue. This dominant position is reflective of the company’s expertise in this niche domain.
Its diverse product portfolio comprises over 80 grades of zinc oxide which are used across a wide variety of industries including rubber, ceramics, paints, pharmaceuticals, electronics, and more. Nevertheless, Rubber and tyres account for around 90% of its sales revenues.
#2 JG Chemicals: Strong Customer Relationships
Over its four decades of operation, JG Chemicals has cultivated strong and enduring relationships with a wide spectrum of customers across multiple industries such as tires, ceramics, paints, cosmetics, and batteries. The company is a supplier to 9 out of top 10 global tyre manufacturers and to all of the top 11 Indian tyre manufacturers.
#3 JG Chemicals IPO: Robust Manufacturing Capacities
The company operates three state-of-the-art manufacturing facilities located at (i) Jangalpur (Kolkata, West Bengal); (ii) Belur (Kolkata, West Bengal); and (iii) Naidupeta (Nellore District, Andhra Pradesh). As on October 31, 2022, JG Chemicals had an aggregate installed capacity of 77,040 MTPA (Metric Tonnes Per Annum) for producing Zinc Oxide, Zinc Ingot, Zinc Sulphate and other allied chemicals. Additionally, the Naidupeta facility – largest of the company – has recently undergone capacity expansion.
#4 Successful Revenue Growth in Mature Industry
According to a report by CARE, tyre production in India grew at a tepid CAGR of 0.32% in the last five fiscal years. This reflects the characteristics of a mature industry and tyres are clearly not something that consumers would buy in excess.
Nevertheless, JG Chemicals has been able to grow its volumes at a significantly higher CAGR of 12.10% during the same timeframe. This has been possible as a result of the company’s long term relationship with tyre companies and its ability to offer the right quality at the right price to customers.
#5 JG Chemicals IPO: Offer Details
JG Chemicals IPO is scheduled to open soon, most likely sometime next week. This offering comprises an Offer for Sale (OFS) of 5,700,000 shares, alongside a fresh issue of INR 202.5 crore. The retail investors will be allotted 35% of the shares. The IPO will be listed on both BSE and NSE.
#6 JG Chemicals: Objects of the Issue
The company intends to utilize the Net Proceeds towards the following objects:
- Investment in its material subsidiary BDJ Oxides
- (i) repayment or pre-payment, in full or in part, of all or certain borrowings – INR 45 crore
- (ii) funding capital expenditure requirements for setting up of a research and development center situated in Naidupeta (R&D Centre) – INR 5.31 crore
- (iii) funding its long-term working capital requirements – INR 65 crore
- Funding long-term working capital requirements of the company – INR 35 crore
- General corporate purposes
#7 JG Chemicals: International Certifications
JG Chemicals’ subsidiary BDJ Oxides is the only zinc oxide company in India with an IATF certification. This certification is highly preferred by tyre manufacturers in their vendor selection process. JG Chemicals’ commitment to quality is further underscored by its ISO certifications and REACH certification, enabling it to supply its products to the European Union. Additionally, the company’s recognition as a ‘One Star Export House’ reflects its excellence in international trade and commerce.
#8 JG Chemicals IPO: Significant End-Market Exposure
The company’s primary focus on serving industries such as tires, ceramics, paints, cosmetics, and batteries provides it with significant exposure to sectors experiencing sustained growth. With the Indian tire sector alone accounting for 70% of rubber consumption, JG Chemicals stands to benefit from the continued expansion of these end markets.
#9 JG Chemicals IPO: Impressive Revenue Growth
The company has demonstrated robust financial performance, with revenue from operations witnessing a Compound Annual Growth Rate (CAGR) of 23.87% between Fiscals 2020 and 2022. Similarly, its profit after tax has surged significantly, growing at a remarkable CAGR of 75.80% over the same period, reflecting operational efficiency and effective cost management.
| Â | FY 2020 | FY 2021 | FY 2022 | H1 FY 2023 |
| Revenue | 399.39 | 435.30 | 612.83 | 425.07 |
| Expenses | 388.16 | 399.21 | 565.60 | 383.67 |
| Net income | 13.95 | 28.80 | 43.13 | 35.71 |
| Margin (%) | 3.49 | 6.62 | 7.04 | 8.40 |
Enhanced profitability can also be gauged from its rising return ratios and EBITDA margins. As indicated in the table below, the debt equity ratio has remained stable in these years.
|  | FY 2020 | FY 2021 | FY 2022 |
| EPS | 4.08 | 7.39 | 12.61 |
| PE ratio | – | – | – |
| RONW (%) | 15.25 | 21.61 | 27.09 |
| NAV | 26.78 | 34.20 | 46.55 |
| ROCE (%) | 18.36 | 25.27 | 25.83 |
| EBITDA (%) | 6.80 | 11.17 | 10.83 |
| Debt/Equity | 0.62 | 0.69 | 0.62 |
#10 JG Chemicals IPO: Product Customization as Entry Barrier
One of the key entry barriers in the zinc oxide industry is the customization of products to meet specific customer requirements. JG Chemicals’ ability to tailor its offerings to meet the diverse needs of its clients not only enhances customer loyalty but also serves as a significant competitive advantage in the market.
Conclusion
In conclusion, the JG Chemicals IPO presents investors with a compelling opportunity to invest in a market-leading company with a proven track record of success, strong fundamentals, and promising growth potential. However, as with any investment decision, thorough due diligence and consultation with financial advisors are recommended to maximize returns and mitigate risks. As the company prepares to make its debut on the public market, investors would be wise to closely monitor developments and consider taking advantage of this exciting investment opportunity.
