Shares of JG Chemicals made a weak debut on the stock exchanges on Wednesday, in sync with bearish broader market, which was below street expectations. The share price of JG Chemicals, India’s largest zinc oxide manufacturer, was listed at ₹209 apiece on the NSE, down 5.4% against the initial public offering (IPO) price of ₹221 per equity share. On the BSE, the stock was listed at a discount of 4.5% over the issue price at ₹211 per share.
Post listing, JG Chemicals shares declined as much as 16% to hit a low of ₹185.35 on the NSE, while it touched a low of ₹187 and BSE, while the market capitalisation slipped to ₹742 crore.
Meanwhile, the benchmark indices BSE Sensex was trading lower by 560 points at 73,107, and the NSE Nifty was at 22143, down by 193 points.
Ahead of the debut on exchanges, JG Chemicals shares were commanding a grey market premium (GMP) of ₹5 in the unofficial market, indicating the listing price to be around ₹226 per equity share. The JG Chemicals’ GMP fell sharply in the last two days from ₹32 on March 11.
“JG Chemicals, the leading zinc oxide producer in India, witnessed a disappointing debut on the stock exchanges... The listing performance fell significantly short of pre-listing expectations, which anticipated a moderate gain of around 10%,” says Shivani Nyati, Head of Wealth at Swastika Investmart Ltd.
“The zinc oxide industry's competitive nature might have dampened investor enthusiasm. The company's heavy reliance on the rubber and tire industry, which can be cyclical, could be a concern for investors,” says Nyati.
“The negative listing raises concerns about investor confidence in JG Chemicals' future prospects. Investors who participated in the IPO should closely monitor the company's performance and the overall market conditions. Investors with a long-term view may hold their position by maintaining a stop loss at ₹190,” Nyati adds.
The ₹251.19 crore IPO of JG Chemicals IPO, comprising a fresh issue of ₹165 crore and an offer for sale (OFS) of shares worth ₹86.19 crore by the promoters and other investors, was subscribed 27.78 times. The issue received bids of 22,69,11,245 shares against the offered 81,68,714 equity shares, at a price band of ₹210-221, according to the data available on the stock exchanges. The lot size was 67 shares and in multiples thereafter.
The quota reserved for qualified institutional buyers (QIBs), non-institutional investors (NIIs), and retail investors was booked 32.09 times, 46.32 times, and 17.43 times, respectively.
Founded in 1975, the zinc oxide manufacturer intends to use fund raised from issuance of fresh equities to invest in subsidiary BDJ Oxides; repay the debt of the subsidiary; fund capital expenditure requirements for setting up a research and development center situated in Naidupeta, Andhra Pradesh. A part of the capital will be used to fund its long-term working capital requirements.
J.G. Chemicals along with its subsidiary is India’s largest zinc oxide manufacturer in terms of production and revenue through the French process, with a market share of around 30% as of March 2022. It sells over 80 grades of zinc oxide using the French process, a dominant production technology for producing zinc oxide adopted by all the major producers in the Americas, Europe, and Asia, as per CARE report. Its product caters to a wide spectrum of industrial applications, including in rubber (tyre & other rubber products), ceramics, paints & coatings, pharmaceuticals & cosmetics, electronics & batteries, agro-chemicals & fertilizers, speciality chemicals, lubricants, oil & gas and animal feed.
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