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Industry : Chemicals

JG Chemicals View all IPOs

Price Band

Rs. 210 – Rs. 221

JG Chemicals is going public with a fresh issue and offer for sale. The issue opens on 5th March 2024.

MOJO CALL

Why

Avoid

MOJO CALL

Avoid

Neutral

Depending on just one product and Industry

JG Chemicals is involved in the business of manufacturing and supplying zinc oxide that has various applications in the rubber, pharma, and agriculture industries. But, the company derives 90% of its revenue from Rubber making it depend heavily on this one industry for growth. The revenue and profit of the company have grown well over the last three fiscals, but the margins of the company were showing signs of a slight decline. Even in the first 9 months of FY24, the revenue, and net profit when annualized are poised to show negative growth in both top line and bottom line. This is mainly attributed to fall in zinc oxide prices globally, a result of a fall in zinc prices which is a key raw material.
JG Chemicals is involved in the business of manufacturing and supplying zinc oxide that has various applications in the rubber, pharma, and agriculture industries. But, the company derives 90% of its revenue from Rubber making it depend heavily on this one industry for growth. The revenue and profit of the company have grown well over the last three fiscals, but the margins of the company were showing signs of a slight decline. Even in the first 9 months of FY24, the revenue, and net profit when annualized are poised to show negative growth in both top line and bottom line. This is mainly attributed to fall in zinc oxide prices globally, a result of a fall in zinc prices which is a key raw material.
The company also has one product which is zinc oxide, and it just sells different grades of it. Any fluctuations in demand could adversely affect the revenues of the company in the future.
On a positive note, the company has been reporting positive cash flow from operations since FY22 and reported a CFO of Rs 67 crore which is ideal for a firm looking to expand.

Valuations

If we annualize FY24, the company is asking for a PE of 35x and a market cap-to-sales of 1.2x. These valuations seem unattractive, and we believe there is little room for capital appreciation. Hence, we recommend avoiding this IPO.

Issue Details

Issue Opens	5th Mar 2024
Issue Closes	7th Mar 2024
Price Band	Rs. 210 – Rs. 221
Issue size (Upper Band)	Rs. 251 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 866 Cr
Sales- March 2023 (Rs./Crs)	794 Cr
Net Profit - March 2023 (Rs./Crs)	57 Cr
Industry	Chemicals
Promoters	SURESH JHUNJHUNWALA
Lead Manager	EMKAY GLOBAL

Objective of the Issue

Details

Objectives of the Issue – Fresh Issue & Offer for Sale – Rs. 251 cr

The Objectives of the Offer are for:
1. Repayment of debt
4. Funding working capital
2. Funding capital expenditure
3. Setting up an R&D facility
5. General corporate purposes

List of Shareholders Selling Their Stake

Name	Type	No. of shares	% of OFS
Vision Projects	Promoter	20,28,900	52%
Jayanti Commercial	Promoter	1,100	0%
Suresh Kumar Jhunjhunwala	Promoter	12,60,000	32%
Anirudh Jhunjhunwala	Promoter	6,10,000	16%

Business Operations

About Company

JG Chemicals, India's leading zinc oxide manufacturer, boasts the largest production capacity and revenue in the industry, primarily utilizing the French process, a dominant technology globally. With a substantial market share of approximately 30% as of March 2022, JG Chemicals offers over 80 grades of zinc oxide, positioning itself among the top ten manufacturers worldwide.

Established in 2001, JG Chemicals has continually expanded its operations and diversified its product portfolio to serve various industrial sectors. Its zinc oxide finds application across a wide range of industries, including rubber (tyre & other rubber products), ceramics, paints & coatings, pharmaceuticals & cosmetics, electronics & batteries, agro-chemicals & fertilizers, speciality chemicals, lubricants, oil & gas, and animal feed. With a global footprint, JG Chemicals has become a prominent player in the zinc oxide market, catering to diverse industrial needs.

Segment Revenue Breakup

Revenue Breakdown by Industry:
Industry	H1FY24	FY23	FY22	FY21
Rubber	91%	90%	90%	89%
Pharma	7%	7%	6%	7%
Agriculture	1%	1%	2%	2%
Others	2%	2%	2%	2%

Financials

Financial Overview

The company’s revenue has grown at 34% over the last two years while the net profit grew by 40% CAGR

In FY23, The company’s Return on Capital Employed was 29% which dropped to 8.2% for 9MFY24

The Net profit margin of the company is 7% in FY23, but has dropped off to 4% in 9MFY24

The company reported positive CFO in FY22, FY23 and 9MFY24 showing healthy cash generation

Financial Performance (Rs/crore)

Rs./Crs	9MFY24	FY 23	FY 22	FY 21
Sales	491	794	623	440
Net Profit	19	57	43	29