JNK India IPO: 10 key risks investors must know before subscribing to the issue

On Monday, April 22, the company garnered ₹194.84 crore from anchor investors. Among the global and domestic organisations that participated in the anchor were Goldman Sachs, Kotak Mutual Fund, HDFC Mutual Fund, Nippon Mutual Fund, Mirae Asset Fund, DSP, LIC Mutual Fund, Bajaj Allianz Life Insurance, and Aditya Birla SunLife Insurance.

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Also Read: JNK India IPO opens today: GMP, subscription status, review, price, other details. Apply or not?

The red herring prospectus (RHP) states that JNK India is a manufacturer of “heating equipment,” which includes reformers, cracking furnaces, and process fired heaters. They are necessary for process industries including fertiliser, petrochemicals, and oil and gas refineries. The business offers engineering, development, production, supply, installation, and commissioning services for heating equipment to both domestic and international markets.

JNK India IPO includes a fresh issue of ₹300 crore in addition to an offer-for-sale (OFS) of up to 8,421,052 equity shares with a face value of ₹2 made by the promoter selling shareholders Goutam Rampelli (up to 1,122,807), JNK Global Co Ltd (up to 2,432,749), Mascot Capital and Marketing Private Limited (up to 4,397,661), and individual selling shareholder Milind Joshi (up to 467,835).

Also Read: JNK India IPO: Issue subscribed 49% on day 1 led by QIBs. Check latest GMP, subscription status, other details

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Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

• The firm receives a large amount of its income from orders that are contracted to it by Contracting Customers; therefore, the loss of fresh contracts might have a negative and substantial impact on their cash flows, operating revenue, and financial situation.
• Order wins and delays in order execution subject companies to time and expense overruns as well as revenue fluctuation, which has a substantially negative influence on their cash flows, financial circumstances, and operating revenue.
• Some old data cannot be traced by the corporation, and there have been past incidents of regulatory non-compliance.
• The business, operational outcomes, financial situation, and cash flows may all be negatively impacted by the cost and availability of raw materials. Neither does the company sign any long-term agreements with its suppliers.
• Any decrease in the capital expenditures of the fertilizer, petrochemical, and oil and gas industries would have a negative effect on their cash flows, operating revenue, and financial health.

Also Read: JNK India IPO: Heating equipment maker raises ₹195 crore from anchor investors ahead of IPO

• The company’s sales of heating equipment account for the majority of its income. A reduction in the demand for such heating equipment might have a negative impact on the company’s operating revenue and financial standing.
• The company is an asset-light business that outsources much of its fabrication work to outside fabricators, which entails a number of risks.
• The company’s business, financial situation, and operational outcomes might all suffer if it is unable to grow regionally.
• The Offer for Sale will not generate any revenue for the firm. The proceeds from the Offer for Sale will be distributed to the Selling Shareholders.
• The business needs a large amount of operating cash. Their business, cash flows, and operational outcomes would suffer if they were to borrow money, acquire more capital, or provide bank guarantees or performance bank guarantees in the future.

Also Read: JNK India IPO: From price band to GMP – here are 10 things to know before subscribing to issue

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.

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Published: 23 Apr 2024, 06:01 PM IST