JNK India Limited IPO Review
JNK India Limited is a prominent player in the engineering and technology sector, specializing in manufacturing heating equipment, flares, incinerators, and other related products. The company has established itself as a leader in sustainable development through its innovative technology and engineering expertise. The company was founded on June 14, 2010, marking over a decade of operations in the industry.
The company's promoters, including Goutam Rampelli, Dipak Kacharulal Bharuka, JNK Heaters Co. Ltd, Mascot Capital and Marketing Pvt Ltd, and shareholder Milind Joshi, are significant stakeholders. JNK India is the Indian subsidiary of the South Korean-based JNK Global, which holds a 16% market share globally, including JNK India's contributions.
JNK India Limited was incorporated in Thane, Maharashtra, a city known for its industrial prowess and strategic location near Mumbai, the financial capital of India.
JNK India Limited was established with the mission to contribute to sustainable development through technology and engineering. The company aimed to leverage the technical know-how of JNK Heaters and capitalize on growth opportunities in renewable energy systems in India, such as onsite hydrogen production and Solar PV-EPC.
Over the years, JNK India Limited has evolved to meet the growing demand for heating equipment in industries like oil and gas, petrochemicals, and fertilizers. The company offers a wide range of products and services, including process-fired heaters, reformers, cracking furnaces, and comprehensive solutions for hydrogen energy, renewable energy, and environmental projects.
JNK India Limited stands out as a company with a robust foundation, a clear vision for the future, and a commitment to contributing to the world's sustainable energy solutions. Its journey from a regional manufacturer to a global technology solutions provider is a testament to its strategic initiatives and the value it delivers to its customers and stakeholders.
Competitive Strengths
The company's competitive strengths are multifaceted, reflecting its established market position and forward-looking business strategy.
Revenue, Sales, and Profit
JNK India Limited has demonstrated a robust financial performance in the fiscal year ending March 31, 2023. The company's revenue or turnover is reported to be in the range of INR 100 crore to 500 crore, indicating a strong market presence and sales performance. This financial growth is further underscored by a significant increase in the company's net worth, which has risen by 69.63%, reflecting the company's growing equity and overall financial health. The EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, has also seen an impressive increase of 30.97%. This metric is crucial as it provides insights into the company's operational profitability before non-operating expenses and capital structure impacts. Moreover, the total assets of JNK India Limited have increased by 26.19%, suggesting a solid expansion in the company's resource base and its ability to generate future revenues.
The company's liabilities have shown a marginal increase of 0.68%, which is relatively small compared to the growth in assets, indicating a stable financial leverage and a well-managed debt profile. The debt-to-equity ratio stands at 0.28, which is a healthy indicator of the company's financial leverage and suggests that it has not overburdened itself with debt. The return on equity is reported at 38.10%, a testament to the company's efficiency in generating profits from its shareholders' investments.
Distribution Network and Geographical Reach
JNK India Limited has established a robust distribution network and extensive geographical reach, catering to a diverse clientele. The company's operations encompass the manufacturing, supply, installation, and commissioning of heating equipment, flares, incinerators, and other products. As of March 31, 2023, JNK India Limited has served 17 customers within India and seven overseas, indicating a strong domestic presence and a growing international footprint. The company's domestic projects span across multiple Indian states including Andhra Pradesh, Assam, Bihar, Karnataka, Kerala, Maharashtra, Tamil Nadu, and West Bengal, showcasing a widespread distribution network within the country. Internationally, JNK India Limited has completed projects in countries such as Nigeria and Mexico, and has ongoing ventures in Oman, Algeria, and Lithuania, further demonstrating its global reach. This expansion aligns with the company's strategic focus on the renewable energy sector, particularly in solar PV-EPC and onsite hydrogen production, leveraging the technical expertise of its affiliate, JNK Heaters. The company's commitment to quality and customer satisfaction is reflected in its ISO certifications and the long-standing relationships it maintains with its clients, which include seven out of the twelve oil refining companies in India. JNK India Limited's distribution network and geographical reach are a testament to its capabilities and competitive advantage in the energy and manufacturing sectors.
Unique Features
JNK India is recognized as a leading process fired heater company in the nation. Their expertise extends to thermal designing, engineering, manufacturing, supplying, installing, and commissioning complex equipment. With a strong customer base in India and abroad, they have served 17 customers domestically and seven overseas, including seven out of the twelve oil refining companies in India. The company's commitment to innovation is evident in its venture into the renewable energy sector, positioning itself in the third most attractive renewable energy market globally. Starting in Fiscal 2022, JNK India has been developing capabilities in onsite hydrogen production and Solar PV-EPC, leveraging the technical know-how of JNK Heaters to tap into the growing renewable energy systems market. Their business services are comprehensive, offering feasibility studies, process design, basic and detailed engineering, project management, procurement, shop fabrication, quality control, field erection, supervision, and start-up services. JNK India's mission and vision reflect their commitment to sustainable development through technology and engineering, prioritizing safety, cost, quality, and timely execution in all projects.
Investment in Research and Development
JNK India Limited, a subsidiary of South Korea-based JNK Global, is a manufacturer of critical heating equipment for industries such as oil and gas, petrochemicals, and fertilizers. The company's investment in research and development (R&D) is a testament to its commitment to innovation and quality. While specific figures for R&D investment are not publicly disclosed, the company's growth trajectory and financial performance indicate a strong emphasis on advancing their technological capabilities. The consistent revenue growth and robust profit margins suggest that JNK India Limited reinvests a significant portion of its earnings into R&D to maintain its competitive edge in a market with high entry barriers. This strategic focus on R&D likely supports the company's ability to meet stringent quality norms and adapt to the evolving demands of the energy sector, particularly as the global shift towards renewable energy sources presents new challenges and opportunities.
JNK India Limited IPO Details
Issue Date: The issue date in an IPO, also known as the initial offering date, is when a company's stock is first made available for public purchase. This date is a significant milestone in the process of an initial public offering, marking the transition of a company from private to public status. (Issue Date: April 23, 2024 to April 25, 2024).
Listing Date: The listing date refers to the day when the company's shares are officially listed and begin trading on a stock exchange. This is typically several business days (3-6 days) after the issue date after processes like share allotment and finalization are completed. On this date, investors who were allotted shares during the IPO can begin selling them, and new investors can start purchasing them on the exchange at the prevailing market price. (Listing Date: Tuesday, April 30, 2024).
Face Value of Shares: The face value of shares in an IPO, also known as the nominal or par value, is a predetermined fixed price set by the company and mentioned in its memorandum of association. It represents the initial capital contributed by the founders and is used for accounting and regulatory purposes. During an IPO, shares are typically offered at a price higher than the face value, which includes a premium based on market demand and the company's performance indicators. (IPO Face Value: ₹2 per share).
Price Band: A price band of an IPO is the range of prices within which the investors can bid for the shares of a company that is going public. The price band is set by the issuer and the lead managers of the IPO, based on various factors such as the demand and supply of the shares, the financial performance and valuation of the company, and the market conditions. (IPO Price: ₹395 to ₹415 per share).
Lot Size: In an Initial Public Offering (IPO), the lot size refers to the minimum number of shares an investor can apply for. It is a pre-determined set of shares that investors must bid for, and applications must be in multiples of this lot size. The lot size ensures a standardized bidding process and helps in the fair allocation of shares among investors. (Lot Size: 36 Shares).
Total Issue Size: The total issue size represents the total number of shares the company is offering to raise capital through the IPO. This number is determined by the company and its advisors, considering factors like their funding needs and the expected investor demand. The total issue size is then divided by the lot size to determine the total number of lots available for purchase by investors. (Total Issue Size: 16,015,988 shares (aggregating up to ₹649.47 Cr)).
Fresh Issue: A fresh issue of shares in an IPO refers to the creation and sale of new shares by a company to the public for the first time to raise capital. Unlike an Offer for Sale, where existing shareholders sell their shares, a fresh issue results in new funds going directly to the company, which can be used for various purposes such as expansion, debt repayment, or investment in new projects. This process dilutes the existing shareholding but does not provide an exit route for current investors. (Fresh Issue: 7,594,936 shares (aggregating up to ₹300.000 Cr)).
Offer for Sale: The offer for sale, which is the amount and type of shares that the company is selling to the public. The offer for sale can be either primary or secondary, or a combination of both. A primary offer for sale means that the company is issuing new shares and raising fresh capital. A secondary offer for sale means that the existing shareholders are selling their shares and receiving the proceeds. A combination offer for sale means that both new and existing shares are being sold. (Offers for Sale: 8,421,052 shares of INR 2 (aggregating up to ₹349.47 Cr)).
Issue Type: The type of an IPO can vary depending on the market and regulatory conditions. Some of the common types of IPOs are, Fixed priced IPO, Auction IPO, Book Building IPO, and Hybrid IPO. (Issue Type: Book BuildIssue IPO).
Listing At: An integral part of the IPO process is the listing. This refers to the day the company's shares officially begin trading on a stock exchange, such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) in India. Once listed, anyone with a brokerage account can buy and sell the company's shares on the exchange. (Listing at: NSE BSE).
Retail Shares Offered: This refers to the portion of the total shares being made available specifically for individual investors, distinct from institutional investors like banks or hedge funds. Regulatory bodies often mandate a minimum percentage of shares be reserved for retail investors, aiming to promote broader public participation in the capital markets. (Retail Shares Offered: 5,477,489 (35.00%)).
QIB Shares Offered: QIBs are institutional investors such as banks, mutual funds, insurance companies, pension funds, etc., who have expertise and financial resources to invest in the securities market. They are considered as informed and sophisticated investors who can assess the risks and returns of an IPO. QIBs can bid for up to 50% of the total shares offered in an IPO via the profitability route, or up to 75% of the total shares offered in an IPO via the QIB route. QIBs have to pay only 10% of the bid amount at the time of application, and the rest after the finalization of the basis of allotment. (QIB Shares Offered: 3,129,903 (20.00%)).
NII (HNI) Shares Offered: NIIs are investors who are not QIBs or retail investors. They include high net-worth individuals (HNIs), corporate bodies, trusts, societies, etc., who bid for more than Rs 2 lakhs worth of shares in an IPO. NIIs can bid for up to 15% of the total shares offered in an IPO. NIIs have to pay 100% of the bid amount at the time of application. NIIs cannot bid at the cut-off price, which is the highest price at which the shares are allotted. HNIs are a sub-category of NIIs who bid for more than Rs 10 lakhs worth of shares in an IPO. (NII Shares Offered: 2,347,497 (15.00%)).
Anchor Investor Shares Offered: Anchor investor shares in an IPO refer to a portion of shares reserved for Qualified Institutional Buyers (QIBs) who commit to purchasing the shares before the IPO is open to the public. These investors, often comprising mutual funds, banks, insurance companies, and other financial institutions, are seen as a vote of confidence in the IPO due to their reputation and the rigorous research they conduct before investing. They bid at least one day prior to the IPO opening and are subject to a lock-in period post-IPO, which helps stabilize the share price during the initial trading period. The anchor investor's role is crucial in setting a precedent for the IPO's pricing and demand, influencing other potential investors' perceptions of the IPO's value and stability. (Anchor Investor Shares Offered: 4,694,989 (30.00%)).
Competitors of JNK India Limited
JNK India Limited specializes in designing, manufacturing, and installing industrial heating equipment for various process industries. While JNK claims a competitive advantage due to its diverse capabilities, they do face competition in the Indian market. Here's a breakdown of their competitor landscape:
Main Competitor:
Thermax Ltd.: A leading Indian engineering conglomerate with a significant presence in industrial heating solutions. Thermax offers a broad product portfolio that overlaps with JNK's offerings, potentially leading to price competition during tenders.
Other Potential Competitors:
While JNK considers Thermax their main competitor, there might be other companies they compete with depending on the specific project requirements.
These include:
Companies offering similar fired heaters, reformers, and other equipment: Several smaller or regional companies might specialize in specific equipment that JNK offers. Depending on project requirements and budget, these companies could be competitors.
Engineering, Procurement, and Construction (EPC) companies: EPC companies might outsource the manufacturing of some equipment to JNK, but they could also have their own preferred vendors or in-house fabrication capabilities, limiting JNK's involvement in certain projects.
Conclusion
In conclusion, the JNK India IPO presents a compelling opportunity for investors. The company's niche position in the Heating Equipment segment, consistent growth in financial performance, and a significant order book of Rs. 845 crore as of December 31, 2023, underscore its potential. With a reasonable pricing based on annualized FY24 earnings and a diverse project portfolio across domestic and international markets, JNK India stands as a promising investment for those looking at medium to long-term gains. However, as with any investment, potential investors should consider their individual risk profiles and conduct thorough due diligence before participating in the IPO.
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Disclaimer: This is not an investment advisory. The article above is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing securities, that suit your needs. The performance and returns of any equity stock can neither be predicted nor guaranteed.
FAQs
Q: What is an IPO?
An Initial Public Offering (IPO) is a process through which a privately held company offers its shares to the public for the first time and becomes a publicly traded company.
Q: How can I apply for an IPO?
You can apply for an IPO through various methods:
ASBA (Application Supported by Blocked Amount): In this method, your application money remains in your bank account until the basis of allotment is finalized.
UPI (Unified Payment Interface): You can authorize the blocking of funds in your bank account using UPI while applying for an IPO.
Q: What is ASBA?
ASBA stands for Application Supported by Blocked Amount. It allows your application money to be blocked in your bank account during the IPO bidding process. You continue to receive interest on the blocked amount.
Q: What is the difference between book building and a normal public issue?
Book building is a process where demand for securities is elicited and the price is assessed based on investor bids. In a normal public issue, the price is fixed by the issuer.
Q: Can I make payments through UPI for IPOs?
Yes, you can use UPI as a payment method for IPOs. The UPI platform blocks the funds for IPO applications after you approve the fund block mandate request.
Q: What is the minimum order quantity for an IPO?
The minimum number of shares you can apply for in an IPO is known as the minimum order quantity. It varies for each IPO.
Q: What is the cut-off price in an IPO?
The cut-off price is the price at which you bid for shares without specifying a particular price. It allows you to participate in the IPO without specifying a specific bid price.
Q: Can I revise my bids during the IPO process?
Yes, you can revise your bids multiple times before the IPO bidding period ends.
Q: Which banks offer the ASBA facility for IPOs?
Several banks, known as Self Certified Syndicate Banks (SCSBs), offer the ASBA facility. Some examples include HDFC Bank, ICICI Bank, Axis Bank, and SBI.
Q: How do I find IPO mandates on UPI apps?
You can check the list of UPI handles supported for IPO payments on the National Payments Corporation of India (NPCI) website. These handles allow you to apply for IPOs using UPI.