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Corporate Report

Published on: Feb. 26, 2024, 10:29 a.m.
JG Chemicals’ success formula: Low emission, high production
  • Anuj, Suresh and Anirudh Jhunjhunwala: committed to provide quality products

By Lancelot Joseph. Executive Editor, Business India

“We have a strong focus on sustainability and caring for the environment and sustainable development is our prime motto,” says Anirudh Jhunjhunwala, MD & CEO of India’s largest zinc oxide manufacturer, JG Chemicals Ltd. “We have, hence, adopted a sustainable manufacturing process by using over 90 per cent recycled metal – the secondary zinc including scrap – as our raw material, instead of virgin metal,” he says and explains that this helps the company lower the emission of carbon dioxide, reducing air and water pollution. Above all, its water consumption is also considerably reduced. The company has also adopted a waste heat recovery system that ensures less carbon emissions and helps cut the energy cost by about 25 per cent.

Chemical companies, like other sectors, are under pressure from investors as well as consumers to improve their Environmental, Governance and Social (ESG) practices across the value chain. Chemical industries, particularly, are held accountable for their raw material sourcing and recyclability of the products produced.

Zinc oxide produced from zinc dross, ash and scrap affects the industry in several major ways. It primarily reduces the consumption of raw material inputs to manufacturing by returning recycled zinc to the value chain. Recycling zinc scrap for manufacturing zinc oxide helps improve the ESG compliance and rating of the company.

Zinc dross is the scrap that remains after steel is galvanised. This scrap is generated by large steel mills like SAIL, JSW Steel, Tata Steel, etc and by several other galvanisers across the country and globally. The overall availability of zinc dross is far less than the total requirement in India. As a result, a large quantity of zinc dross is imported into India, says a CARE study.

Zinc oxide is not a plain vanilla product where one size fits all. Each customer even within the same industry has his own specific requirement and specification. Globally, over 50 per cent of ZnO is used in non-rubber applications; in India, only 30 per cent is used in the non-rubber industry. The Indian zinc oxide industry includes a limited number of organised players but they constitute a major portion of the market, due to the high barriers to entry such as stringent vendor approval process by tyre manufacturers, raw-material tie-ups, technological expertise, and large working capital requirements. A tyre account approval takes up to 7 years, industry sources say.

The Indian zinc oxide industry has organized players like JG Chemicals Pvt Ltd; Rubamin Pvt Ltd, Transpek-Silox Ltd. that account for about 50 per cent of the Indian zinc oxide market while the rest of the market consists of various small zinc oxide producers. As a result, the industry is likely to see consolidation over the medium to long term as operational challenges increase.

Genesis of the company

Formed in 2001 by Chairman Suresh Jhunjhunwala, JG Chemicals has emerged as India’s largest zinc oxide manufacturer with an installed capacity of 59,904 MTPA for zinc oxide, 7,056 MTPA for zinc ingots and a 10,080 MTPA capacity for zinc sulphate and other allied chemicals. The Kolkata-based Jhunjhunwala family had varied business interests, including glass, and Suresh farmed out to set up the chemical unit.

  • We have a strong focus on sustainability and caring for the environment and sustainable development is our prime motto

    Anirudh Jhunjhunwala, MD & CEO, JG Chemicals Ltd

JG Chemicals now sells over 80 grades of zinc oxide, catering to a wide variety of customers, across various end-use industries including rubber (tyre and other rubber products), ceramics, paints and coatings, pharmaceuticals and cosmetics, electronics and batteries, agro-chemicals and fertilizers, speciality chemicals, lubricants, oil and gas and animal feed.

“Our emphasis on customer-driven marketing, and we take personal interest in sales, marketing and customer development,” says Anirudh Jhunjhunwala. This has helped the company create a strong presence in the global zinc oxide industry. And it sells the chemical to 9 out of the top 10 global tyre manufacturers and to all of the top 11 Indian tyre units.

“During fiscals 2017 to 2021, tyre production in India has grown at a CAGR of 0.32 per cent, whereas JG Chemicals has grown its volumes at a CAGR of 13.32 per cent in the same period by catering to the replacement market, which is around 55 per cent of the total tyre demand,” says company director and CFO Anuj Jhunjhunwala. The management attributes the growth to the company’s long-term relationships with tyre companies, the ability to customise and scale up production, timely supply and competitive prices.

For the fiscal year 2022, the company reported a revenue of Rs612.83 crore against Rs435.30 crore a year ago. Net profit for the period stood at Rs43.13 crore as against Rs28.80 crore last year. For the six months ended 30 September, 2022, revenue from operations stood at Rs425.07 crore and net profit stood at Rs35.71 crore.

“Our leadership position offers us competitive advantages such as product pricing, economies of scale, and the ability to scale our business, increase customer loyalty and expand our client base, all of which have in turn resulted in the growth of revenues and profit over the last three fiscals,” says Jhunjhunwala.

Zinc oxide or ZnO is an inorganic compound, white in colour and insoluble in water and is present in the earth’s crust as the mineral zincite, and usually contains manganese and other impurities. Hence, for commercial use it is synthetically made. It has many properties that makes it desirable to various end user industries. It is used as an additive for various products like rubber, ceramics, cosmetics, food supplements, plastics, paints, sealants, batteries, animal feed, etc.

Zinc oxide is the best activator for sulphur vulcanisation for rubber companies, and without the use of zinc oxide, rubber products cannot meet safety standards. The properties of zinc oxide make it an essential component in various other applications like paints, pharmaceuticals and agriculture, etc.

  • JG Chemicals sells over 80 grades of zinc oxide, catering to a wide variety of customers

The success story of JG Chemicals is scripted by its direct relationship with the customer. No wonder, over 95 per cent of its sales in the last three fiscals was directly to the customers without the involvement of any intermediary or distributor. “Our relationship with our customers extends to several years. Around 90 per cent of the 250 buyers were repeat customers,” adds Anirudh Jhunjhunwala. “Such a long-term association with key customers also offers competitive advantages such as revenue visibility, industry goodwill and enables us to maintain our growth trajectory,” he explains.

On the procurement side, too, most of the zinc dross, which comes from overseas, is through old and established trading houses which work based on long-term relationships and refrain from doing business with new entrants due to a wide range of complexities associated with the trade. JG Chemicals built a diverse global supplier base, having procured raw materials from over 100 global suppliers in the last three fiscals. “This extensive base enables us to evaluate the various available options and choose according to our commercial considerations,” says Jhunjhunwala. “We have nurtured some of these relationships over the years, enabling us to be termed as a preferred customer for various global suppliers of zinc dross,” he says.

“With our commitment to providing high quality products, we have implemented good manufacturing practices right from supply chain to product delivery,” he claims. “This enables us to maintain consistent quality, efficiency and product safety. Our ability to address varied and stringent client requirements over long periods enables us to serve our customers better. This has helped us to obtain additional business from existing customers as well as nurture new customer relationships in an industry marked by high entry barriers.”

As per a CARE report, during the past two decades, the speciality chemicals industry has witnessed a transformation, its growth being driven by the increasing use of such chemicals in sectors like automotive, rubber industry, ceramics, pharmaceuticals and cosmetics, paints and coatings, agrochemicals, nutraceuticals, animal feed and batteries. In the Indian market, the demand for zinc oxide is expected to grow exponentially. Going forward, growth in end-user industries is expected to fuel the use of zinc oxide which has properties like high chemical stability, high electrochemical coupling coefficient, a broad range of radiation absorption and high photo stability.

JG Chemicals is going public now, having received final observation from the capital markets regulator, Securities and Exchange Board of India (SEBI) for the IPO. The issue consists of a fresh issue of Rs202.5 crore and an offer-for-sale of up to 5.7 million equity shares by its existing shareholders and promoters. The OFS comprises up to 3.64 million equity shares by Vision Projects and Finvest Private Limited, 1.4 lakh equity shares by Jayanti Commercial Limited, 1.27 million equity shares by Suresh Kumar Jhunjhunwala (HUF), and 6.5 lakh equity shares by Anirudh Jhunjhunwala (HUF). The proceeds from the fresh issue will be used for investment in its material arm BDJ Oxides.

The company will use Rs45 crore for repayment of the debt, Rs5.31 crore to set up a research and development centre, Rs65 crore for funding its long-term working capital requirement for its subsidiary, and Rs35 crore for its own long-term working capital requirement and general corporate purposes.

  • The company deploys stringent safety measures to protect its employees

    The company deploys stringent safety measures to protect its employees

Its Material Subsidiary, BDJ Oxides is the only zinc oxide manufacturing facility in India to have an IATF certification, which is preferred by tyre manufacturers supplying to original equipment manufacturers.

As the battery industry explodes, J G Chemicals is exploring ways to develop battery grade zinc oxide and chemicals. Zinc oxide battery helps play a major role in semiconductor ceramic elements for operation at elevated temperatures or high voltages.

India is currently at the nascent stage of creating a domestic cell manufacturing ecosystem and has a negligible presence in the global market for manufacturing advanced cell technologies. But there is an enormous potential for large scale battery manufacturing units which could allow domestically produced batteries to cater to the demand for grid storage applications, consumer electronics, and so on.

It is estimated that in an accelerated scenario, the annual demand for batteries by 2030 will be around 106GWh to 260 GWh. In terms of market size, the annual market for stationery and mobile batteries could surpass Rs1.12 lakh crore by 2030, according to the CARE report.

JG Chemicals is determined to continue to focus on R&D and undertake product innovation, increase its productivity and operating efficiency, deepen penetration in existing markets and serve as the cornerstone to its success in new markets.

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