JNK India Limited IPO Analysis: Check out the JNK India IPO Review 2024! JNK India is set to launch its IPO worth Rs. 649.47 Cr, opening on April 23rd, 2024, and closing on April 25th. Stay tuned for an analysis of the strengths and weaknesses of JNK India Limited IPO Review 2024. Keep reading to learn more!

About JNK India Limited

JNK India specializes in producing process-fired heaters, reformers, and cracking furnaces essential for industries like oil and gas refineries, petrochemicals, and fertilizers. It operates as a subsidiary of JNK Global, a Korean company recognized as one of the largest manufacturers of process heaters globally.

A process-fired heater is an industrial device that directly heats fluids or gases by burning fuels such as natural gas or propane. Reformers are equipment used to convert hydrocarbons such as natural gas or naphtha into synthesis gas, known as syngas, which is a blend of hydrogen and carbon monoxide.

Moreover, cracking furnaces are employed to transform bulky hydrocarbon molecules into smaller ones, suitable for producing fuels, chemicals, and polymers. Cracking involves breaking down hydrocarbons, often by heating the feedstock with a catalyst present.

The company specializes in thermal design, engineering, manufacturing, supplying, installation, and commissioning of Heating Equipment, serving domestic and international markets. Over time, JNK India has expanded into flares and incinerator systems, while also developing expertise in the renewable sector, particularly in green hydrogen.

Heating equipment is essential for process industries like oil and gas refineries, petrochemicals, fertilizers, hydrogen, and methanol plants, among others. JNK has successfully executed projects in 8 Indian states and internationally, including Nigeria and Mexico.

Additionally, it is currently involved in projects within India, specifically in Gujarat, Odisha, Haryana, and Rajasthan. Internationally, its projects extend to Oman, Algeria, and Lithuania.

Industry Overview

By CY2045, India is projected to become the third-largest oil consumer globally, with demand forecasted to reach 11 million barrels per day, marking a twofold increase from CY2022 to CY2025.

The Indian refinery industry’s primary growth drivers are the increasing demand for transportation fuels and petrochemical feedstock. India is projected to become a major contributor to non-OECD petroleum consumption worldwide.

As per the Ministry of Petroleum and Natural Gas (“MoPNG”), the country’s consumption of petroleum products during FY23 increased by 10% compared to FY22, reaching a volume of nearly 223 million metric tonnes. There are 18 refinery projects expected to be commissioned by Fiscal 2031 with a cumulative capacity of 124.0 MMTPA.

Petrochemicals play a pivotal role in India’s industrial sector, serving as a significant catalyst for economic expansion. In CY2020, India’s per capita polymer consumption stood at approximately 12 Kg, significantly lower than the global average of 37 kilograms. As the GDP continues to rise, there is a projected substantial increase in demand for petrochemical products over the medium to long term.

India’s economy is primarily agricultural, with approximately 80% of the population relying on this sector. As the population continues to rise, there’s an imperative to boost agricultural output and broaden its base. Fertilizers play a crucial role in this endeavor, serving as a primary input for enhancing food grain production. They fortify the soil and improve its fertility, contributing to agricultural sustainability and growth.

Urea is the primary fertilizer utilized in India, constituting approximately 60% of the country’s total fertilizer consumption. However, local production falls short of meeting domestic demand. India aims to enhance capacity in this sector to diminish import reliance and achieve self-sufficiency by 2025.

Financial Highlights

In FY23, JNK India’s revenue reached Rs. 407 Cr, marking a notable 37.4% increase from FY22’s Rs. 296 Cr. This upward trajectory in revenues persisted due to enhanced revenue recognition. Notably, since FY21, JNK India has achieved a remarkable 72% CAGR in revenue growth.

Net profits during this period have grown significantly, with a staggering 68% CAGR from FY21. In FY23, JNK India reported a net profit of Rs. 46 Cr, marking an increase of Rs. 36 Cr from FY22.

Competitors

JNK India stands as the third and smallest contender in the process heat manufacturing industry. Its closest rival, Thermax, operates across energy, environmental, and chemical solutions. Unlike Thermax, JNK primarily focuses on producing process-fired heaters, reformers, and cracking furnaces.

Because of its extensive diversification and involvement in the solar and green energy sectors, Thermax has attained high valuations of 113 times price-to-earnings. Conversely, BHEL, another heavy equipment manufacturer, has secured multi-year contracts from the government, resulting in a price-to-earnings ratio of 186 times.

JNK’s basic earnings of Rs. 9.66, coupled with a price band at the higher end of Rs. 415, result in a price-to-earnings ratio of 42.96x, outperforming its peers.

Name of the Company	Consolidated/Standalone	Face Value (Rs per share)	Closing price on April 5 2024 (Rs)	Revenue from Operations (in Rs million)	EPS (Rs) Financial Year ended March 31, 2023		NAV (Rs per share)	P/E	RoNW (%)
					Basic	Diluted
JNK India Limited*	Consolidated	2.00	NA	4,073.02	9.66	9.51	25.45	NA	47.71
PEER GROUP
Thermax Limited*	Consolidated	2.00	4,513.75	80,898.10	39.98	39.98	343.67	112.90	12.24
Bharat Heavy Electricals Limited**	Consolidated	2.00	254.85	233,649.40	1.37	1.37	77.05	186.02	1.79

Strengths

• Established Track Record with a Diversified Customer Base: JNK India initiated operations in 2010 and boasts a successful project completion track record spanning over 10 years. As of December 2023, the Company has catered to 21 domestic and 8 overseas customers.
• Well-Positioned to Capture Industrial Tailwinds: The Indian refinery industry is experiencing increasing demand for transportation fuels and petrochemicals, serving as primary growth drivers. JNK India is strategically positioned to capitalize on these opportunities.
• Diversified Product Portfolio: JNK offers a diversified portfolio, providing heating equipment required by various industries such as Oil & Gas, Petrochemicals, Fertilizers, among others.
• Strong Order Book: As of December 31, 2023, JNK India boasted a robust order book of Rs. 845 crore, with 86% of orders originating from India. This substantial order book size ensures revenue visibility for the next 2.5 years, based on the current revenue amount.

Weaknesses

• Revenue unpredictability: The company’s earnings are project-based, leading to an unpredictable revenue stream.
• Promoter reliance: JNK India heavily relies on its Korean promoter JNK Global, accounting for 54% of FY23 revenues, raising dependency concerns.
• Escalating raw material costs: Rising prices of steel, pipes, burners, and fans, along with product imports from China and Europe, pose a significant risk to JNK’s earnings due to inflation.
• Product concentration: JNK India’s revenue is heavily concentrated, with 85% of FY23 revenue and 93% in the first 9 months of FY24 coming from heating equipment sales, indicating high product dependency.

GMP

At the time of composing this article, the Grey Market Premium for JNK India Ltd shares remains unpublished. We will promptly update the article with the anticipated premium once it becomes available.

Key IPO Information

Particulars	Details
IPO Size	Rs. 649.47 Cr
Fresh Issue	Rs. 300 Cr
Offer for sale (OFS)	Rs. 349.47 Cr
Opening date	23 April 2024
Closing date	25 April 2024
Face value	Rs. 2
Price band	Rs. 395 – 415
Lot size	36 Shares
Minimum Lot Size	1 Lot (36 Shares)
Maximum Lot Size	13 Lots (468 Shares)
Minimum Investment	Rs. 14,940
Listing date	30 April 2024

Promoters: Mascot Capital & Marketing Pvt Ltd, JNK Global Co. Ltd (Formerly known as JNK Heaters Co. Ltd, Arvind Kamath, Goutam Rampelli and Dipak Kacharulal Bharuka

Book Running Lead Manager: IIFL Securities Ltd and ICICI Securities Ltd

Registrar to the Offer: Link Intime India Pvt Ltd

Conclusion

In summary, JNK India’s upcoming Rs. 649.47 crore IPO presents an opportunity to tap into India’s expanding refinery and petrochemical sectors. Backed by a solid order book and diverse clientele, the company shows promising prospects.

However, investors must cautiously assess the risks associated with JNK India’s heavy reliance on its Korean promoter, susceptibility to raw material price fluctuations, and overreliance on heating equipment sales.

While the company demonstrates strong financial growth, it’s prudent to conduct a comprehensive analysis of both strengths and weaknesses before considering investment in this IPO.