About the Company:

JG Chemicals Limited was founded in 1975 and is a zinc oxide manufacturer using the French process. The company produces more than 80 grades of zinc oxide.

zinc oxide is used in various industrial applications such as ceramics, paints and coatings, pharmaceuticals and cosmetics, electronics and batteries, agrochemicals and fertilizers, specialty chemicals, lubricants, oil and gas, and animal feed.

The company operates three manufacturing facilities in (i) Jangalpur (Kolkata, West Bengal); (ii) Belur (Kolkata, West Bengal); and (iii) Naidupeta (Nellore District, Andhra Pradesh). Naidupeta is the largest facility, owned and operated by the Material subsidiary

The company has served the needs of more than 200 local and 50 international customers in more than 10 countries. As of December 31, 2023, the company employed 112 permanent employees, over 100 workers and apprentices.

Product wise Revenue:

We can see by the above chart that industry which includes rubber and tyres related businesses, has seen a slight increase in its share of total revenue over the three fiscal years to 90.46% in FY 23. The percentage of revenue from Pharmaceuticals & Chemicals has fluctuated, with a slight increase to 6.79% in 2023 compared to 2022 but still lower than 2021. The share of revenue from the agriculture sector has increase to 1.83% in fiscal 2023 compared to the previous two years. The "Others" category, which likely includes various industries not specified individually, has seen a moderate increase in its share of revenue in fiscal 2023.

Industrial overview:

CHEMICALS AND SPECIALTY CHEMICALS INDUSTRY:

The importance of chemical industry has resulted in proliferation of chemicals across the globe with the industry sales growing at a Compounded Annual Growth Rate (CAGR) of 4.3% from USD 3,575 billion in (Calendar Year) CY16 to USD 4,062 billion in CY19 1and is estimated to grow at a CAGR of 5% to 6% through CY27. This growth will largely be driven by developing markets like Asia Pacific (APAC) which are likely to grow at a higher CAGR of around 7%-8% compared to the growth in more matured markets like US and Europe which will be lower at around 2%-4%.

Shift in preference from China to India:

China has been focusing on pollution control and has been encouraging stricter environment norms for some years now. This has resulted in temporary close down or shutdown of various plants across various industries including chemicals in China. Consequently, such regulations provided an opportunity to India as some global manufacturers that source chemicals from China may look for other sources to avoid any major disturbances in their supply chain and to set up their manufacturing facilities.

The size of the Indian chemical industry (industry division 20 of NIC 2008), in terms of value of output in the year 2020-21 was around Rs 9.87 lakh crore (about USD 132 billion). The size of chemical industry, including pharmaceuticals, in terms of value of output in the year 2020-21 was around Rs 14.3 lakh crore (about USD 193 billion). During last six years, i.e. within 2014-15 to 2019-20, real growth rate in output of chemical industry excluding pharmaceuticals industry was 8.1% which was 8.2% for chemical industry including pharmaceutical industry. Growth in value of output for manufacturing sector during the same period was 6.3%.

Financials:

Overall, the company's performance seems to have improved from 2021 to 2023 as reflected by increasing values in Revenue from Operations, Net Profit Margin and EBITDA. For instance, revenue from operations increased from ₹ 435.30 Crores in 2021 to ₹ 784.58 crores in 2023, and the net profit margin increased from 1.82%to 4.04%. EBITDA Margin is up from 6.62 % in 2021 to 7.24% in 2023. Also, some metrics like return on equity (ROE) and Return on Capital Employed (ROCE) have shown increasing trends over the same period.

Risk Factors:

Company’s business is almost completely dependent on the sale of one principal product i.e. zinc oxide (in various grades) and any reduction in the demand of the same may have an adverse effect on their business and financial performance.

Company’s significantly dependent on the business operations of their material subsidiary i.e. BDJ Oxides Private Limited and any deterioration in the performance of company’s material subsidiary may adversely affect their business, financial condition and results of operations.

Company operations heavily dependent on the rubber and tyre industry and there is a lack of diversification in their business across other Application Industries.

Valuation:

The company's P/E ratio is 12.76, which is lower than the industry average of 32.36 and the company's P/B ratio is 3.51, which is lower than the industry average of 6.74.

Peer Comparison:

IPO Objectives:

The company intends to utilize the Net Proceeds towards the following objects:

1. Investment in Material Subsidiary, viz. BDJ Oxides
(i) Repayment or pre-payment, in full or in part, of all or certain borrowings availed by its Material Subsidiary.
(ii) Funding capital expenditure requirements for setting up of a research and development center situated in Naidupeta, Andhra Pradesh (R&D Centre)
(iii) Funding its long-term working capital requirements;

2. Funding long-term working capital requirements of the Company; and

3. General corporate purposes.

IPO Details: