JNK India IPO opens on Tuesday; should you subscribe to the issue?

The Rs 650 crore-initial public offering (IPO) of JNK India will open for bidding tomorrow, that is, Tuesday, April 23. Brokerage firms, so far, are mostly positive on the issue and suggest subscribing to it on the back of strong fundamentals, rising capex, expansion potentials and sound financials.

JNK India, which is engaged in the design, manufacture, supply, installation, and commissioning of process-fired heaters, reformers and cracking furnaces, is offering its shares in the range of Rs 395-415 apiece. Investors can bid for a minimum of 36 equity shares and its multiples thereafter. The issue will close for bidding on Thursday, April 25.

JNK India is well placed to capitalize on the global as well as Indian capex unfolding in the oil and gas, petrochemicals and fertilizer industries. With the heating equipment industry having limited players due to high entry barriers, JNK has been able to command strong Ebitda margins of 17 per cent and generate ROCE of 40 per cent in FY23, said Nirmal Bang Securities.

"JNK has delivered growth and return ratios which are superior to comparable companies while its valuation is at the lower end of the range. Based on favourable industry structure with limited competition and strong pipeline of orders, we are positive on JNK and recommend to subscribe to the IPO," it added.

The IPO of JNK India includes a fresh share sale of Rs 300 crore and offer-for-sale (OFS) of up to 84,21,052 equity shares by its promoters and other selling shareholders, amounting to Rs 349.47 crore at the upper end of the price band. The anchor details of the issue shall be announced later today.

Thane-based JNK India has completed projects in Andhra Pradesh, Assam, Bihar, Karnataka, Kerala, Maharashtra, Tamil Nadu and West Bengal and has implemented projects globally, including in Nigeria and Mexico.  The company has served over 17 clients in India and seven clients overseas as of March 31, 2023.

JNK has successfully executed projects in various states in India and global markets like Nigeria and Mexico. Global growth in petrochemical capacities is driving the demand for process-fired heaters. Leveraging its engineering capabilities, and established product portfolio, JNK is poised to capitalize on this demand, said InCred Equities' IPO note

"JNK’s IPO price at a higher end implies EV/Ebitda of 23 times and a P/E of 32 times FY24F, considering a 13 per cent revenue growth and Ebitda margin of 22 per cent," it said with a 'subscribe' tag, given the opportunities in heating equipment, healthy order book and strong financials. However, it sees lower capex in refineries, threat from large players and high working capital requirement as key risks for the issue.

The domestic clients of JNK India include Indian Oil Corporation, Tata Projects, Rashtriya Chemicals & Fertilizers and Numaligarh Refinery. One of the manufacturing facilities is located in the Multi-Product Special Economic Zone in Mundra, Gujarat, where production is exclusively for export.

For the nine-months ended December 31, 2023, JNK India reported a net profit of Rs 46.21 crore with a revenue of Rs 256.76 crore. The company's net profit came in at Rs 46.36 crore with revenue of Rs 411.55 crore for the financial year ended on March 31, 2023.

JNK India has a strong position in the heating equipment market, with a focus on diverse offerings and the order book stood at Rs 845 crore as of Q3FY24 shows potential revenue visibility. The company's growth potential is underscored by increasing demand from India's refinery, petrochemical, and fertilizer sectors, as well as its expansion into global markets, said Arihant Capital Markets.

"High entry barriers and a strategic emphasis on capitalizing on global refinery expansions further solidify its investment appeal. With a track record of impressive revenue growth and clear revenue visibility, JNK India presents a compelling opportunity for investors seeking exposure to the heating equipment sector," it said with a 'subscribe for long-term' rating on the issue.

JNK India has reserved 50 per cent of the net offer for the qualified institutional investors (QIBs), while non-institutional investors (NIIs) will get 15 per cent of shares. Retail investors will get 35 per cent of the net offer.

IIFL Securities and ICICI Securities are the book running lead managers of the JNK India IPO, while Link Intime India is the registrar for the issue. Shares of the company are likely to be listed at both the bourses- BSE and NSE on April 30, Tuesday.