JG Chemicals IPO: Issue oversubscribed on day 2 led by retail investors, NIIs; check GMP

JG Chemicals IPO Issue oversubscribed on day 2 led by retail investors, NIIs; check GMP

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JG Chemicals set its IPO price range at ₹210-221 per share. They raised ₹75.35 crore from anchor investors. The company is India’s top zinc oxide manufacturer and has a significant global market presence.

JG Chemicals IPO: Strong Subscription and Company Overview

On the second day of subscriptions, there was strong interest from both retail and non-institutional investors for the JG Chemicals IPO. The overall subscription status was 6.40 times according to BSE data. Retail investors subscribed 8.32 times, non-institutional investors 9.64 times, and qualified institutional buyers (QIB) 45%.

JG Chemicals’ IPO had a strong start, with its retail portion fully subscribed just a few hours after opening. By the end of the first day, the entire IPO had been fully subscribed, reaching a subscription status of 2.47 times according to BSE data.

JG Chemicals’ IPO for retail investors has been oversubscribed 3.64 times, the Non-Institutional Investors (NII) portion is oversubscribed 2.90 times, and Qualified Institutional Buyers (QIB) portion is oversubscribed by 2%. The IPO has allocated up to 50% of shares for Qualified Institutional Buyers (QIB), at least 15% for Non-Institutional Investors (NII), and at least 35% for retail investors. JG Chemicals’ IPO subscription opened on Tuesday, March 5, and will close on Thursday, March 7. The IPO price range for JG Chemicals is ₹210 to ₹221 per share, with a face value of ₹10. Investors can bid for a minimum of 67 shares and then in multiples of 67 shares. On March 4, JG Chemicals raised ₹75.35 crore from anchor investors. JG Chemicals is India’s biggest zinc oxide manufacturer, both in terms of production and revenue, as stated in the Red Herring Prospectus (RHP). It’s also among the top 10 global zinc oxide producers, offering over 80 different grades of the metal.

Many industries, such as rubber (tires and related items), ceramics, paints, pharmaceuticals, electronics, agrochemicals, specialty chemicals, lubricants, oil and gas, and animal feed, use the company’s products.

According to the RHP, the company’s comparable peers include Rajratan Global Wire Ltd (P/E of 33.43), NOCIL Ltd (P/E of 30.97), and Yasho Industries Ltd (P/E of 30.03). From March 31, 2022, to March 31, 2023, JG Chemicals Limited saw a 31.69% increase in profit after tax (PAT) and a 27.47% increase in sales.

Subscription status for JG Chemicals IPO

JG Chemicals IPO received bids for 5,22,81,976 shares, surpassing the 81,68,714 shares offered, as per BSE data. Retail investors bid for 3,42,47,050 shares out of 41,15,000 available for this segment. Non-institutional investors bid for 1,69,99,240 shares out of 17,63,572 available for this segment. Qualified Institutional Buyers (QIBs) bid for 10,35,686 shares out of 22,90,142 available for this segment.

JG Chemicals IPO details

The JG Chemicals IPO is valued at 251.19 crore. It includes a new offering of ₹165 crore and a sale of up to 3,900,000 equity shares valued at ₹86.19 crore by the promoters and other investors.

The sellers are Vision Projects & Finvest Private Ltd (selling up to 2,028,900 shares), Jayanti Commercial Limited (selling up to 1,100 shares), Suresh Kumar Jhunjhunwala (HUF) (selling up to 1,260,000 shares), and Anirudh Jhunjhunwala (HUF) (selling up to 610,000 shares).

The money raised will be used by the company for: investing in its Material Subsidiary, BDJ Oxides; repaying or prepaying some or all of the loans taken by the Material Subsidiary; funding the capital expenses for setting up a research and development center in Naidupeta; and supporting the company’s increased working capital needs.

The lead managers for the JG Chemicals IPO are Centrum Capital Limited, Emkay Global Financial Services Ltd, and Keynote Financial Services Ltd. Kfin Technologies Limited is handling the offering registration.

JG Chemicals IPO GMP today

The grey market premium for JG Chemicals IPO is +50, meaning the shares are trading ₹50 higher than the IPO price. This suggests that the estimated listing price of JG Chemicals shares could be around ₹271 each, which is 22.62% higher than the IPO price of ₹221. The grey market premium reflects investors’ willingness to pay more than the issue price.

Review of JG Chemicals Initial Public Offering (IPO)

Swastika Investmart Ltd: JG Chemicals is India’s top zinc oxide manufacturer, as per the brokerage, due to its significant production capacity. Its expansion in business and operations has positioned it as a leading player in the zinc oxide market.
The brokerage noted the company’s strong relationships with suppliers and clients, along with its 30% market share and consistent financial performance. However, it highlighted risks like industry competition and dependence on the tyre and rubber sector.
“The IPO valuation at 12.75x P/E seems reasonable based on current factors. Given the company’s growth potential and positive industry outlook, we recommend subscribing to this IPO,” stated the brokerage.

Anand Rathi Share and Stock Brokers Ltd stated in its report that JG Chemicals holds a strong position in the market, serving a wide range of customers, including major global and Indian tyre manufacturers. It also noted the company’s significant presence in key industries, a robust supply chain with numerous customers over the past three years, and its commitment to long-term sustainability through environmental efforts.

The brokerage recommended subscribing to the IPO, considering the company’s valuation at a P/E ratio of 15.76x and EV/EBITDA ratio of 12.3x, with a post-issue market capitalization of ₹8,660 million. They believe the IPO is reasonably priced and suggest a “Subscribe-Long term” rating.

 

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