JG Chemicals IPO subscribed 11 times on Day 3 so far; NII portion booked 21x

The initial public offering (IPO) of JG Chemicals saw a decent response from the investors during the third and last day of the bidding process, thanks to buying interest from all investor categories. JG Chemicals ended the first day of the bidding with over 2.45 times bidding, while day two with 6.4 times subscription.

The Kolkata-based JG Chemicals is selling its shares in the price band of Rs 210-221 apiece. Investors can apply for a minimum of 67 shares and its multiples thereafter. It is looking to raise Rs 251.19 crore via IPO, which is entirely a sale of Rs 165 crore and offer-for-sale (OFS) of up to 39,00,000 equity shares.

According to the data, the investors made bids for 9,09,50,892 equity shares, or 11.13 times, compared to the 81,68,714 equity shares offered for the subscription by 12.45 pm on Thursday, March 07. The bidding for the issue, which had kicked-off on Tuesday, March 05, concludes today.

The allocation for non-institutional investors was subscribed 20.89 times, while the portion reserved for retail investors saw a subscription of 12.40 times. However, the quota set aside for qualified institutional bidders (QIBs) attracted bids for 1.34 times as of the same time.

JG Chemicals, incorporated in 1975, produces more than 80 grades of zinc oxide. It has various industrial applications including ceramics, paints and coatings, pharma and cosmetics, electronics and batteries, agrochemicals, fertilisers, speciality chemicals, lubricants, oil & gas and animal feed.

The grey market premium of JG Chemicals has halved in the last 24 hours after the less-than-expected lisitngs of recent companies. Last heard, he company is commanding a premium of Rs 25 in the unofficial market, suggesting a listing pop of about 11 per cent for the investors. However, the premium in the grey market stood around Rs 50 earlier, a day ago.

Analysts tracking the issue are mostly positive on it, suggesting to subscribe to the issue on the back of strong financial performance, niche market sector, high entry barriers and growing demand for its products in various sectors. However, dependence on one single product and select customers pose a threat to the company.

JG Chemical has developed into a significant, diversified zinc oxide player by growing its business and operational scope. The company has Long-term relationships with customers and suppliers. The market share of the Company is around 30 per cent and the company has a track record of financial performance, said JG Chemicals.

"However, some key risks like the industry are competitive, and heavily dependent on the rubber and tyre industry. The IPO valuation of 12.75 times P/E appears fairly priced on a current basis. While the company's future growth potential and the positive industry outlook are encouraging thus we recommend Subscribe rating for this IPO," it said.

Ahead of its IPO, JG Chemicals raised Rs 75.36 crore from anchor investors as it allocated 34,09,818 shares at a price of Rs 221 apiece. The company has reserved 50 per cent of the net offer for the qualified institutional investors (QIBs), while non-institutional investors (NIIs) will get 15 per cent of shares. Retail investors will get 35 per cent of the net offer.

The Indian zinc oxide market is fragmented with limited presence of organized players and JG Chemicals is the largest manufacturer of zinc oxides in India and among the top ten manufacturers of zinc oxides globally. The company is planning to expand its production capacities and broaden the footprint of manufacturing operations, said Master Trust Services.

"At the same time diversify its product offerings and enter new verticals. The company is increasing its focus on R&D to support complex chemistries, product innovation and cost efficiencies, while also paying attention towards deep mining of existing customers and expanding its customer base. Investors looking to invest, can invest in this IPO for a long term," it said.

Centrum Capital, Emkay Global Financial Services and Keynote Financial Services are the book running lead managers of the JG Chemicals IPO, while Kfin Technologies is the registrar for the issue. Shares of the company are likely to be listed at the bourses- both BSE and NSE- on Wednesday, March 13.

 

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