JNK INDIA LIMITED IPO: ISSUE SIZE, PRICE BAND AND MORE

The second IPO that opens for subscription in the new financial year is JNK India, a niche player in the heating equipment segment. The IPO opened for subscription on the 23rd of April and closes on the 25th of April. In this article, we look at the various aspects of JHK's business to help you decide whether to subscribe or invest in the IPO.

JNK India IPO: Key Details

Below are the key details related to the JNK IPO:

• Issue Size: Rs 649.47 crore
• Price Band: Rs 395 - Rs 415
• Lot Size: 36 Shares
• Issue Details: Fresh Issue of Rs 300 crore + remaining  OFS
• Market Cap: At the upper price band, Rs 2,308 crore
• Minimum Investment: Rs 14,940

JNK India IPO: The Business

They are in the business of manufacturing the process-fired heaters, reformers, and cracking furnaces that are required in process industries such as oil and gas refineries, petrochemical, and fertilizer industries. They have capabilities in thermal designing, engineering, manufacturing, supplying, installing, and commissioning Heating Equipment and cater to both domestic and overseas markets.

Over the years they have diversified into flares and incinerator systems and have been developing capabilities in the renewable sector with green hydrogen.

In India, they have completed projects in, amongst others, Andhra Pradesh, Assam, Bihar, Karnataka, Kerala, Maharashtra, Tamil Nadu, and West Bengal, and globally have completed projects in Nigeria and Mexico.

The business model involves collaboration with customers, from the initial consultation, specification, and design stage to the final installation of the Heating Equipment. As of December 31, 2023, they have served 21 customers in India and 8 customers overseas. Further, 7 out of the 12 oil refining companies in India, are their customers and they have supplied or are in the process of supplying Heating Equipment to 11 of the 24 operating oil refineries across India.

The company is also working on building capabilities in the renewable sector with green hydrogen. They are building capabilities in the renewable sector with onsite hydrogen production, hydrogen fuel stations, and solar photovoltaic – EPC (Solar PV-EPC) which forms part of the green hydrogen value chain.

JNK India IPO: Industry Overview

Based on the discussion held with a few of the leading global suppliers, approximately Rs 1,20,000 million of heating equipment have been ordered by the refineries from the countries of interest in the calendar year 2023. There is a boost in order booking as the oil prices softened in the last two years post-pandemic. Some of the large refineries that issued orders during this period are Dangote Refinery (Nigeria) – 32.7 MMTPA, and Olmeca Refinery (Mexico) – 17.1 MMTPA.

JNK Global has installed its process-fired heaters for its customers in Lagos, Nigeria, where one of the biggest refineries in the world (Dangote Refinery) is operated, having a capacity of 32.7 MMTPA. JNK Global is engaged in the design, manufacturing, installation, and maintenance of Fired Heaters and ranks amongst the top three industrial use-fired heater producers globally. The company distributes its products within the domestic market and to overseas markets. Based on the order booking in calendar year 2022, JNK India and JNK Global have 2% and 14% market share globally.

JNK India IPO: Listed Peers

The company has two listed peers - Thermax Limited and Bharat Heavy Electricals Limited. In this section, we compare the three companies to give you an idea of where JNK stands among peers. Here is the comparison based on FY23 numbers:

• In revenue terms, BHEL is the largest player, followed by Thermax and JNK India.
• If we look at Earnings Per Share (EPS), Thermax (39..98) tops the list, followed by JNK India (9.66) and BHEL (1.37).
• Return on Net Worth (RoNW) is highest for JNK India (47.71%), followed by Thermax (12.24%) and BHEL (1.79%).

JNK India IPO: Financials

Let us now look at the financials of JNK India. Here are the details:

• The company has reported a revenue of Rs 137.72 crore, Rs 296.40 crore, and Rs 407.30 crore for FY21, FY22, and FY23. For 9MFY24, the revenue reported was Rs 253.40 crore.
• JNK has reported an EBITDA of Rs 26.01 crore, Rs 54.58 crore, and Rs 73.50 crore for FY21, FY22, and FY23, respectively. The EBITDA margins for the same period were 18.89%, 18.41%, and 18.05%, respectively. The margins have remained stagnant over this period.
• They have reported a net profit (PAT) of Rs 16.48 crore, Rs 35.98, and Rs 46.36 crore for FY21, FY22, and FY23.
• For Fiscals 2021 to 2023, the revenue from operations, EBITDA, and profit after tax had grown at a CAGR of 71.97%, 68.09%, and 67.75%, respectively.
• For the last three financial years, the company has reported an average EPS of Rs 7.83 and an average RoNW of 55.36%.
• If we attribute FY24 annualized earnings to the company's post-IPO paid-up equity capital, then the asking price is at a P/E of 37.46.
• The Return on Equity for FY21, FY22, and FY23 was 56.96%, 66.03%, and 47.71%, respectively. Return on Capital Employed (ROCE) has reduced from 71.90% in FY21 to 57.17% in FY23.

JNK India IPO: Competitive Strengths

Below are the competitive strengths of JNK India:

• They have an established track record with a diverse customer base.
• The company is well-positioned to capture industry tailwinds through its demonstrated capabilities over time.
• JNK has a diversifying product portfolio to cater to varied industries. Their heating Equipment is required in process industries such as oil and gas refineries, petrochemicals, fertilizers, hydrogen, and methanol plants, etc.
• They are led by a qualified and experienced management team, with a deep understanding of the industry and their customers’ preferences and requirements.

JNK India IPO: Risks

Below are the risks highlighted by the company in their RHP:

The company derives a significant portion of its revenue from orders that are contracted to them by Contracting Customers, any failure to obtain new contracts may impact its revenue from operations, cash flows, and financial conditions materially and adversely.

The number of orders they have received in the past, their current Order Book, and their growth rate may not be indicative of the number of orders they will receive in the future.

They have derived the majority of their revenues from their Corporate Promoter, JNK Global, and use their experience and technology support for select projects. Any kind of dissociation with JNK Global may hurt the business.

Availability and cost of raw materials may adversely affect the business, results of operations, financial condition, and cash flows. Also, they do not enter into any long-term contracts with their suppliers.