JG Chemicals Debuts Weakly on D-Street with 5% Discount
JG Chemicals Ltd, the largest zinc oxide manufacturer in India, experienced a less-than-stellar stock market debut, with its shares opening at a discount. On the National Stock Exchange (NSE), the shares began trading at Rs 209, marking a 5.43% decrease from the issue price of Rs 221, while on the Bombay Stock Exchange (BSE), the stock opened at Rs 211, a 4.52% discount. Despite the anticipation of a modest 2% gain in the grey market, the shares further declined to Rs 196.10, down by 11.26% during the trading session.
The initial public offering (IPO), which closed on March 7, was met with strong investor interest, being oversubscribed by 27.78 times. The IPO comprised a fresh issue of Rs 165 crore and an offer for sale (OFS) of up to 3,900,000 equity shares, totaling Rs 251.19 crore. Institutional investors led the subscription with a 32.09 times bid, followed by retail investors at 17.44 times and non-institutional investors at 46.33 times.
The company plans to allocate the net proceeds from the fresh issue towards investment in its material subsidiary BDJ Oxides, repayment of debt, funding capital expenditure for a new research and development center, and meeting working capital requirements. The firm is also considering the establishment of a greenfield manufacturing facility in Gujarat. At the higher end of the price band, JG Chemicals was valued at an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio of 12.3x based on FY23 earnings.
