JG Chemicals delivers losses on debut. Should you exit or wait for upside?

Analysts said 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 also be a concern for investors.

"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," said Shivani Nyati, Head of Wealth at Swastika Investmart.

The issue, which closed on March 7, received a decent response from investors with an overall subscription of nearly 28 times at close.

The retail portion of the issue was subscribed 17.4 times, while the non-institutional category (NII) category was subscribed a whopping 46.3 times. The quota for qualified institutional buyers (QIBs) was booked 32 times.

Net proceeds from the fresh issue are proposed to be utilised towards investment in its material subsidiary, repayment of debt, funding capex, working capital requirements as well as other general corporate purposes.

JG Chemicals is India’s largest zinc oxide manufacturer in terms of production and revenue for zinc oxide manufacturing through French process, which is the dominant production technology for producing zinc oxide and has been adopted by all the major producers in Americas, Europe and Asia.

It sells over 80 grades of zinc oxide and are among the top ten manufacturers of zinc oxides globally. The firm also supplies to leading paint manufacturers, footwear players, and cosmetics players in the country.

For the nine months ended December 2023, the company's total income stood at Rs 491 crore and profit after tax was at Rs 18.5 crore. In FY23, total income jumped 27% year-on-year to Rs 794 crore, while profit increased 32% to Rs 56.8 crore.

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