JG-Chemicals-Limited-IPO

J.G. Chemicals Limited IPO Company Profile:

J.G. Chemicals Limited (“JGCL”) is India’s largest zinc oxide manufacturer in terms of production and revenue for zinc oxide manufacturing through the French process, which is the dominant production technology for producing zinc oxide and has been adopted by all the major producers in the Americas, Europe, and Asia. The market share of JGCL is around 30% as on March 2022. The company sells over 80 grades of zinc oxide and is among the top ten manufacturers of zinc oxides globally. Since its incorporation in 2001, the company has expanded its business and scale of operations and has grown into a large, diversified zinc oxide player with a global footprint. JGCL’s product caters to a wide spectrum of industrial applications, including rubber (tyre & other rubber products), ceramics, paints & coatings, pharmaceuticals & cosmetics, electronics & batteries, speciality chemicals, agro-chemicals & fertilizers, lubricants, oil & gas and animal feed.

In India, tyre industry accounts for 70% of rubber consumption, and the companies in the tyre industry are the largest consumers of the company’s product. Along with being suppliers to 9 out of the top 10 global tyre manufacturers and to all of the top 11 tyre manufacturers in India, JGCL also supplies to leading paints manufacturers, cosmetics players, and footwear players in India. The company’s Material Subsidiary, BDJ Oxides is the only zinc oxide manufacturing facility in India to have an IATF certification, which is preferred by tyre manufacturers supplying to original equipment manufacturers.

JGCL conducts operations at its manufacturing facilities located at Jangalpur and Belur in West Bengal and at Naidupeta in Andhra Pradesh in India. In addition to the existing facilities and with a view to diversifying the product portfolio into the zinc sulphate and allied products business, the company has recently set up a new zinc sulphate and other allied chemicals unit, near the existing manufacturing facility located in Naidupeta in the state of Andhra Pradesh.


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    J.G. Chemicals Limited IPO Details:

    IPO Open Date Not Available
    IPO Close Date Not Available
    Listing Date Not Available
    Face Value ₹10 per share
    Price Not Available
    Lot Size Not Available
    Issue Size Not Available
    Fresh Issue [●] shares

    (aggregating up to ₹202.5 Cr)

    Offer For Sale 5,700,000 shares

    (aggregating up to ₹[●] Cr)

    Issue Type Book Built Issue IPO
    Listing At BSE, NSE
    QIB Shares Offered Not more than 50% of the Offer
    NII (HNI) Shares Offered Not less than 15% of the Offer
    Retail Shares Offered Not less than 35% of the Offer
    Promoters Suresh Jhunjhunwala, Anirudh Jhunjhunwala and Anuj Jhunjhunwala

    J.G. Chemicals Limited IPO Financial Analysis:

    Particulars 6M of FY-23(in cr.) FY-22(in cr.) FY-21(in cr.) FY-20(in cr.) CAGR
    Revenue from Operations 4250.72 6128.30 4352.98 3993.91 15.3%
    Other Income 71.31 102.17 51.07 78.78
    Cost of Goods Sold 3395.07 4958.47 3490.17 3403.33 13.4%
    Employee Cost 70.25 133.11 102.99 96.90
    Other expenses 333.57 475.11 324.83 301.05
    EBITDA 523.14 663.78 486.06 271.41 34.7%
    EBITDA margin% 12.31% 10.83% 11.17% 6.80%  
    Depreciation 13.26 26.80 23.38 18.64
    Interest 24.52 62.51 50.70 61.66
    PBT 485.36 574.47 411.98 191.11 44.3%
    Total tax 128.23 143.21 123.99 51.58
    PAT 357.13 431.26 287.99 139.53 45.7%
    PAT margin% 8.40% 7.04% 6.62% 3.49%  

    J.G. Chemicals Limited IPO Revenue from Operations:

    Industry 6M of FY-23(in cr.) FY-22(in cr.) FY-21(in cr.) FY-20(in cr.)
    Rubber and tyres 86.66% 90.10% 89.20% 89.90%
    Pharmaceuticals & Chemicals 6.94% 6.37% 7.48% 6.14%
    Agriculture 1.18% 2.06% 1.79% 1.53%
    Others* 2.22% 1.47% 1.53% 2.43%
    Total 100% 100% 100% 100%

    Shareholders of J.G. Chemicals Limited:

    S.NO. Name of the Shareholder No. of Shares % of pre-Offer shareholding
    1 Suresh Jhunjhunwala 3,900,000 12.30%
    2 Anirudh Jhunjhunwala 4,160,000 13.11%
    3 Anuj Jhunjhunwala 3,900,000 12.30%
    4 Alka Jhunjhunwala 4,160,000 13.11%
    5 Vision Projects & Finvest Private Limited 3,640,000 11.48%
    6 Jayanti Commercial Limited 3,185,000 10.04%
    7 Anirudh Jhunjhunwala (HUF) 650,000 2.05%
    8 Suresh Kumar Jhunjhunwala (HUF) 1,300,000 4.10%
    9 Alkan Fiscal Services Private Limited 2,600,000 8.20%
    10 BDJ Chemicals Private Limited 1,300,000 4.10%
    11 Eeshwar Fiscal Services Private Limited 2,925,000 9.22%
      Total 31,720,000 100%

    Selling Shareholders of J.G. Chemicals Limited:

    S. No. Name of the Selling Shareholder Number of Equity Shares

    being offered in the Offer for Sale (Up to)

    1. Vision Projects & Finvest Private Limited 3,640,000 Equity Shares
    2. Jayanti Commercial Limited 140,000 Equity Shares
    3. Suresh Kumar Jhunjhunwala (HUF) 1,270,000 Equity Shares
    4. Anirudh Jhunjhunwala (HUF) 650,000 Equity Shares

    J.G. Chemicals Limited IPO Strengths:

    • JGCL’s products cater to a wide spectrum of industrial applications including rubber (tyre & other rubber products), ceramics, paints & coatings, pharmaceuticals & cosmetics, electronics & batteries, agro-chemicals & fertilizers, speciality chemicals, lubricants, oil and gas and animal feed. The company cater to a diverse customer base across various end-use industries and have a long-standing relationship with a few marquee customers in such industries. Diversification of the customer base across the domestic and global markets, has enabled it to further diversify and expand its business relationships.

    • JGCL’s leadership position offers it competitive advantages such as product pricing, economies of scale, and the ability to scale the business, increase customer loyalty and expand the client base, all of which have in turn resulted in the growth of revenues and profit over the last three Fiscals.

    • JGCL’s end-use industries have significant entry barriers due to specific factors unique to such end-use industries. Given the nature of the application of the products and the processes involved, the products are subject to and measured against high-quality standards and rigorous product approval systems with stringent impurity specifications. Further, because end products manufactured by the company’s customers are typically subject to stringent regulatory and industry standards, any change in the vendor of the product may require significant time and expense on part of the customers, which acts as an entry barrier and disincentives any such changes for them.

    • JGCL strives to maintain a robust financial, emphasising on having a strong balance sheet and increased profitability. The company’s strong balance sheet coupled with low levels of debt enables it to pursue opportunities for further growth.

    • JGCL’s business has high working capital requirements and the strong balance sheet allows it to meet such requirements and is a factor critical to the business. The company’s financial strength and access to financing provides it with a valuable competitive advantage over its competitors

    • JGCL’s long-standing relationship with its suppliers and customers envisioning a partnership approach together with its internal processes, including exercise of supplier quality assurance system has enabled it to ensure a robust supply chain.
    • JGCL uses the French process to produce various grades of zinc oxide, and uses modern pulse jet bag filters and combustion systems which ensure high productivity, low energy consumption and maintain required standards with respect to emission norms. The company believes in adopting a sustainable manufacturing process and using over 90% recycled metal, i.e. secondary zinc (dross/ scrap/ scrub) as raw material, instead of virgin metal, which helps the company in lowering the emission of carbon dioxide, reduces air and water pollution.

    J.G. Chemicals Limited IPO Risk Factors:

    • JGCL derives a significant part of its revenue from select customers. If one or more of such customers choose not to source their requirements from the company, the business, financial condition and results of operations may be adversely affected.

    • Among various Application Industries of the company’s products, its operations are heavily dependent on the rubber and tyre industry. In relation to other end-use industries, the demand for the company’s products and the margin of its products are dependent on and directly affected by factors affecting such industries. Accordingly, the company’s failure to effectively adapt to such end-use industry-related disruptions could adversely affect the business, operations, and financial condition.

    • JGCL do not have long-term agreements with its customers and relies on purchase orders for delivery of its products. The loss of one or more of its customers or a reduction in their demand for its products could adversely affect the business, results of operations and financial condition.

    • JGCL’s business is dependent on the sale of one principal product (with multiple variations) i.e. zinc oxide in various grades and any reduction in the demand for the same may have an adverse effect on the business and financial performance.

    • JGCL is subject to strict quality requirements, regular inspections and audits, and its product sales depend on its quality control and standards. Any failure to comply with quality standards may adversely affect the company’s business prospects and financial performance, including cancellation of existing and future orders.

    J.G. Chemicals Limited IPO

    Objects of the Offer:

    JGCL intends to utilize the Net Proceeds towards the following objects:

    • Investment in JGCL’s Material Subsidiary, viz. BDJ Oxides (i) repayment or pre-payment, in full or in part, of all or certain borrowings availed by the Material Subsidiary; (ii) funding capital expenditure requirements for setting up of a research and development centre situated in Naidupeta (“R&D Centre”); and (iii) funding its long-term working capital requirements.

    • Funding long-term working capital requirements of
    • General corporate purposes.

    J.G. Chemicals Limited IPO Prospectus:

    Registrar to the offer:

    KFin Technologies Limited

    Selenium, Tower B, Plot No. 31 and 32 Financial

    District, Nanakramguda, Serilingampally

    Hyderabad, Rangareddi 500 032, Telangana, India

    Telephone: +91 40 6716 2222;

    Toll-Free No.: 18003094001

    E-mail: jgchemicals.ipo@kfintech.com

    Website: www.kfintech.com

    Investor grievance e-mail: einward.ris@kfintech.com

    Contact Person: M. Murali Krishna

    SEBI registration number: INR000000221