JG Chemicals IPO - Investment Rationale, Financials, Valuations, Key Risks And More: Anand Rathi

Anand Rathi's IPO Report

JG Chemicals Ltd. launched its initial public offering today and will conclude on March 07. India's largest zinc oxide manufacturer has fixed the price band fixed in the range of Rs 210 to Rs 221 per share.

The Rs 251.2 crore IPO comprises of fresh issue of Rs 165 crore and an offer for sale of Rs 86.19 crore. The minimum order lot is 67. The company's shares will be listed on the National Stock Exchange and the BSE.

Object of the issue:

• Investment in Material Subsidiary, viz. BDJ Oxides repayment or pre-payment, in full or in part, of all or certain borrowings availed by its Material Subsidiary; funding capex requirements for setting up of a R&D center situated in Andhra Pradesh.

• Long-term working capital requirements.

• General corporate purposes.

Valuation

JG Chemicals has a leading market position with a diversified customer base, being supplier to nine out of top 10 global tyre manufacturers and to all the top 11 Indian tyre manufacturers with high entry barriers in key end-use industries and long-term relationships with customers and suppliers and having robust supply chain with more than 250 customers in last three years along with focus on long term sustainability with environmental initiatives and safety standards.

At the upper price band company is valuing at price/earning of 15.76 times and enterprise value/Ebitda 12.3 times with a market cap of Rs 8,660 million post issue of equity shares.

We believe that the IPO is fairly priced and recommend a “Subscribe-Long term” rating to the IPO.

Click on the attachment to read the full IPO report:

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