Will JG Chemicals be yet another tepid debut on bourses this week?

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26 Aug, 2025 12:21

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Shares of leading zinc oxide manufacturer JG Chemicals are likely to see a tepid start on the bourses on March 13. Analysts expect around 12 percent listing gains over the issue price of Rs 221 per share despite healthy IPO subscription numbers and the company's strong market position with diversified client base. There may be an impact from recent correction in the midcap and smallcap space, but analysts are very much positive on its business in the medium to long term.

The JG Chemicals IPO saw a subscription of 27.78 times during March 5-7, backed by demand from all kinds of investors. While non-institutional investors picked 46.33 times the allotted quota, qualified institutional buyers 32.09 times and retail investors bought 17.44 times the portion set aside for them.

The Kolkata-based company has raised Rs 251.19 crore through its maiden public issue, which comprised a fresh issue of shares worth Rs 165 crore and an offer-for-sale of 39 lakh equity shares worth Rs 86.19 crore by promoters.

"We expect a muted listing of JG Chemicals IPO. The listing price could be around Rs 245-255, a gain of around 12 percent," said Amit Goel, Co-Founder and Chief Global Strategist at Pace 360.

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Prathamesh Masdekar, research analyst at StoxBox, also sees tepid listing for shares. "We expect the stock to list at a premium of around 12 percent."

JG Chemicals is India’s largest zinc oxide manufacturer serving to almost all top tyre manufacturing companies globally. Over 90 percent of the company's revenue comes from repeat business, and it maintains positive long-term relationships with end users.

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Along with being suppliers to 9 out of top 10 global tyre manufacturers and to all of the top 11 tyre manufacturers in India, JG Chemicals also provides products to leading paints manufacturers, footwear players and cosmetics players in India.

Following increase in both its top and bottom lines from FY21 to FY23, it experienced degrowth in nine-month period ended December FY24 due to a sharp decline in the price of zinc oxide. "The company will soon be back on track as the trends seem to be reversing," Amit Goel said.

On the valuation front, at the upper band of Rs 221, the stock is available at a market capitalisation of Rs 866 crore. Based on annualized FY24 earnings, a fully diluted post-IPO paid-up capital, the company is asking a P/E of 35x which seems the offer is fully priced in line with industry average of 35-40x, analysts said.

JG Chemicals has recorded a 31.7 percent on-year growth in net profit at Rs 56.8 crore for the financial year 2022-23, with revenue rising 28 percent to Rs 784.6 crore. In the nine months period ended December FY24, net profit stood at Rs 18.51 crore on revenue of Rs 486.3 crore.

Meanwhile, it was available at around 10-12 percent premium over the issue price, in the grey market, an unofficial market for trading in IPO shares till the listing, the market observers said.

"Considering downcasting market mood and selling pressure in the mid & small cap sector, a flat to muted listing can be justified," Prashanth Tapse, Senior VP research & research analyst at Mehta Equities said.

But given the company's strong market position, diversified client base and strategic growth initiatives, he believes JG Chemicals continues to solidify its pivotal position in the zinc oxide market.

JG Chemicals is going to utilise Rs 91 crore out of the net fresh issue proceeds for its material subsidiary (BDJ Oxides), and Rs 35 crore for its long-term working capital requirements. Further, the remaining funds will be used for general corporate purposes.

Its three manufacturing facilities with total installed capacity of 77,040 MTPA (metric tonnes per annum) are located at Jangalpur (Kolkata), Belur (Kolkata), and Naidupeta (Andhra Pradesh).

Meanwhile, the Nifty Midcap 100 index fell 3.5 percent and Smallcap 100 index dropped 10 percent from their all-time highs, in last one month.

RK Swamy on March 12 listed with a loss of 13 percent and ended the first session with a nine percent loss, despite the IPO subscribing 25.94 times.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.