JG Chemicals Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Chemical |
| Sub-class | Zinc Oxide, Zinc Salts |
| Location | Howrah – West Bengal Nellore – Andhra Pradesh |
| Establishment Year | 1975 |
Management
| Managing Director | Anirudh Jhunjhunwala |
| Educational Qualifications | Bachelor’s degree in Commerce from Calcutta University Master’s degree in Business Administration from the University of Warwick |
| Experience | Over 20 years of experience in the chemical and specialty chemical industry |
| Annual Salary | 155 Lakhs |
| Total Number of Employees | 112 |
About
J.G. Chemicals Limited is the largest zinc oxide manufacturer in India, with a globally recognized presence. The company specializes in producing over 80 grades of zinc oxide using the French process, a dominant technology in the industry
Products and Services
Their products are utilized in various industrial applications, including rubber (tyre & other rubber products), ceramics, paints & coatings, pharmaceuticals & cosmetics, electronics & batteries, agro-chemicals & fertilizers, speciality chemicals, lubricants, oil & gas and animal feed.
Raw Materials:
Virgin zinc metal and Zinc Dross/scrap are the primary raw materials used in the company’s production process. These materials make up 83.16% of the company’s total income, during the nine months ending December 31, 2023.
Suppliers:
J.G. Chemicals Limited sources its primary raw materials, virgin zinc metal and Zinc Dross (a type of zinc scrap), from both domestic and international suppliers. While the company maintains long-term relationships with some virgin zinc metal suppliers, it typically sources Zinc Dross through purchase orders, online auctions, or spot purchases from domestic and international third-party suppliers.
Clients The company operates on a business-to-business (B2B) model. The company’s clientele includes nine of the top ten global tyre manufacturers. J.G Chemicals Limited emphasizes direct engagement with its customer base, which has resulted in over 95% of sales being conducted directly without intermediaries in the past three fiscal years.
Subsidiary:
BDJ Oxides, a material subsidiary of J.G. Chemicals Limited, is the sole zinc oxide manufacturing facility in India to hold an IATF certification, a certification highly regarded by tyre manufacturers.
J.G. Chemicals Limited maintains robust quality control measures, holding accreditations and certifications like ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018, emphasizing their commitment to high standards.
Work Flow Chart
Revenue – Category
Revenue – Region
Audit and Legal
There are no qualifications or adverse remarks from the auditors. However, the auditors did note that they relied on the audit reports of other auditors for subsidiary, BDJ Oxides Private Limited
As of December 31, 2023, the total contingent liabilities amounted to ₹1.75 Cr, mostly related to tax proceedings.
SWOT Analysis
Strengths
| Leading Market Position: The company is India’s largest zinc oxide manufacturer in terms of production and revenue for zinc oxide produced through the French process. |
| Diversified Customer Base: J.G. Chemicals serves a wide range of industries, including tyres, ceramics, pharmaceuticals, and chemicals. |
| Experienced Management Team: The company benefits from the expertise of its promoters and management team who possess significant experience in the chemical industry. |
| Strong Financial Performance: The company has a track record of strong financial performance, with consistent revenue growth, healthy profitability margins, and improving cash flows. |
Weaknesses
| Dependence on the Rubber and Tyre Industry: J.G. Chemicals’ business is heavily reliant on the rubber and tyre industry, particularly in India. |
| Reliance on Overseas Raw Material Procurement: J.G. Chemicals heavily depends on procuring raw materials, particularly Zinc Dross, from overseas suppliers. This reliance on international sourcing exposes the company to risks associated with fluctuating exchange rates, global supply chain disruptions, and potential increases in raw material prices |
| Limited R&D Expenditure: While J.G. Chemicals plans to establish a dedicated R&D center at its Naidupeta facility, the company has not made significant investments in research and development in recent years. The sources reveal that the company has not incurred any identifiable R&D expenses in Fiscal Years 2021, 2022, and 2023. |
| Significant Reliance on a Material Subsidiary: J.G. Chemicals’ consolidated financial performance hinges significantly on the contributions of its material subsidiary, BDJ Oxides Private Limited. |
Opportunities
| Growth in End-Use Industries: The demand for zinc oxide is expected to grow, driven by the expansion of end-use industries such as tires, ceramics, and pharmaceuticals. |
| Expanding into New Geographies: J.G. Chemicals can explore opportunities to expand its presence in international markets where the demand for zinc oxide is increasing. |
Threats
| Intense Competition: The zinc oxide industry is competitive, with both domestic and international players vying for market share. |
| Raw Material Price Volatility: The cost of raw materials, particularly zinc, can fluctuate significantly, impacting profitability. |
| Environmental Regulations: Stringent environmental laws and regulations, especially concerning hazardous substances, could lead to increased compliance costs or production disruptions. |
Porter’s Five Forces1
| Threat of New Entrants | MODERATE |
| While the industry does not have any significant entry barriers J.G. Chemicals enjoys a leading market position and reaching their scale of production can be difficult. |
| Bargaining Power of Suppliers | LOW |
| Primary raw material Zinc metal is a commodity and the company has multiple supplier sources in domestic and international markets, reducing their bargaining power. However, the company could face price fluctuations from global trends. |
| Bargaining Power of Buyers | MODERATE |
| The company derives a significant part of its revenue from select customers like big tyre companies giving them power to bargain. |
| Threat of Substitute Products or Services | MODERATE |
| While Zinc Oxide is critical for the tyre vulcanization and can’t be replaced yet, due to its harmful and toxic nature, research is ongoing to replace it with safer metal oxides, posing a threat of substitute. |
| Rivalry Among Existing Competitors | HIGH |
| The company operates in a competitive industry with both domestic and international players |
Peer Comparison
Green Box
Expansion in Naidupeta: The company recently expanded its Naidupeta facility, increasing its capacity for zinc oxide by 13,440 MTPA and adding 10,080 MTPA for zinc sulphate and allied chemicals it further wants to CapEx on this unit to set up an R&D centre.
Greenfield Facility in Gujarat: J.G. Chemicals plans to establish a new manufacturing facility in Gujarat to expand its presence in western India and increase overall production capacity
Product Diversification: The company’s entry into new product verticals, such as zinc sulphate and other speciality chemicals, offers potential for revenue and margin growth.
J.G. Chemicals Limited has a strong financial track record, with revenue from operations growing at a CAGR of 34.25% between Fiscal Years 2021 and 2023.
Long-Term Relationships and Robust Supply Chain: J.G. Chemicals prioritizes direct relationships with customers, with 95% of sales in the last three fiscal years made directly without intermediaries.
The company has improved its debt-to-equity ratio in the past few years reaching 0.11 as of December 31, 2023
Amber Box
Capacity Utilization: Capacity Utilization has been around 50-65% for the past few years
Zinc Oxide Market: The global zinc oxide market has shown steady growth, increasing at a CAGR of 2.4% from 2017 to 2021
J.G. Chemicals experienced negative operating cash flow in Fiscal 2021 ₹ -73.46 million.
However, the company achieved positive operating cash flows in Fiscal 2022 ₹ 67.52 million and Fiscal 2023 ₹ 311.66 million.
Red Box
Customer Concentration: Although J.G. Chemicals has a diversified customer base, a significant portion of its revenue comes from a few select clients.
Dependence on a Single Product: J.G. Chemicals’ reliance on zinc oxide for almost all of its revenue exposes it to significant risk. Any downturn in demand for zinc oxide, due to factors like a slowdown in the tyre industry or changes in customer preferences, would severely impact the company’s financials.
Raw Material Price Volatility: Reliance on global supply chains exposes J.G. Chemicals to price fluctuations in commodity markets and foreign exchange rate volatility, which could increase production costs and impact profit margins.
Images
- For Porter’s Five Forces, force value of “LOW” is considered good. ↩︎
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