Evaluating JNK India Ltd IPO; Should you invest?

Here's a deep dive and exclusive details of JNK India Ltd’s IPO

About the Issue  

JNK India Ltd is launching its initial public offering (IPO) for equity shares valued at Rs 2 each. The IPO price range is set between Rs 395 and Rs 415 per equity share, resulting in a total issue size of Rs 649.47 crore at the upper price band.  

The IPO is scheduled to commence on April 23, 2024, and will conclude on April 25, 2024. The market lot size for the IPO is 36 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 468 shares or a total investment of Rs 1,94,220 assuming the upper price band.   

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Funding working capital requirements

2. General corporate purposes

Promoter holding  

Mascot Capital and Marketing Pvt Ltd, JNK Heaters Co Ltd, Arvind Kamath, Goutam Rampelli, and Dipak Kacharulal Bharuka are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 94.56 per cent in the company.   

Company profile  

The company specialises in manufacturing heating equipment, including process-fired heaters, reformers, and cracking furnaces, essential for various process industries such as oil and gas refineries, petrochemical, and fertiliser industries. With expertise in thermal design, engineering, manufacturing, supply, installation, and commissioning, it serves both domestic and international markets. Over time, it has expanded its offerings to include flares and incinerator systems and has ventured into the renewable sector, focusing on green hydrogen technology.

As of December 31, 2023, the company’s order book stands at Rs 845 crore. Within this, Rs 729 crore originates from customers in India, while Rs 116 crore comes from customers in overseas markets. As of December 31, 2023, the company has provided services to 21 customers in India and 8 customers abroad. Moreover, it counts 7 out of the 12 oil refining companies in India among its clientele, supplying or in the process of supplying heating equipment to 11 out of the 24 operational oil refineries across the country. 

Among its domestic customers are notable names such as Indian Oil Corporation Ltd, Tata Projects Ltd, Rashtriya Chemicals & Fertilizers Ltd, and Numaligarh Refinery Ltd. JNK Global has additionally installed process-fired heaters for a customer in Lagos, Nigeria. This location is home to one of the world's largest refineries, the Dangote Refinery, boasting a capacity of 32.7 million metric tonnes per annum.

The company aims to broaden its presence in new product categories and strengthen its foothold in target markets. It plans to expand its customer network in select overseas markets, including Europe, to leverage untapped opportunities. 

The company is also focusing on developing capabilities in the renewable sector, particularly in green hydrogen. This includes initiatives such as onsite hydrogen production, the establishment of hydrogen fuel stations, and involvement in solar photovoltaic (Solar PV-EPC), which contributes to the green hydrogen value chain.

Financials 

The company has successfully demonstrated robust growth in both its revenue and net profit over the past few years. In FY23, both revenue and net profit witnessed strong year-on-year growth, with a 39 per cent surge in revenue and a 28 per cent rise in net profit compared to FY22. The 9MFY24 figures were equally impressive, suggesting robust growth for FY24 if the current pace is maintained. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 48 per cent and 42 per cent, respectively, for the fiscal year 2023.

Valuation and outlook  

The issue is priced with a P/BV ratio of 11.91 times, calculated using its Net Asset Value (NAV) of Rs 34.84 as of December 31, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 33. JNK India Ltd exhibited superior performance in comparison to its listed peers, taking into account both valuation and returns simultaneously.

Given the promising prospects within India's oil & gas and hydrogen industry, coupled with the company's established financial track record, impressive client portfolio, and ambitious expansion goals, it is well-positioned for significant growth. 

Hence, we advise investors to contemplate subscribing to the offering with a long-term perspective.