JK Files & Engineering IPO : 7 things to know about
JK Files & Engineering Ltd, part of the Raymond group of the Singhania family, will file for an IPO which will entirely be an offer for sale by the company. The company, JK Files & Engineering Ltd is currently fully owned by the Raymond group so the IPO will entail offer by the Raymond group and the funds will be used by the Raymond group to deleverage the debt in the overall balance sheet.
1) JK Files & Engineering Ltd, promoted by the Raymond group, has filed its draft red herring prospectus (DRHP) with SEBI to raise funds via an IPO issue. JK Files & Engineering Ltd is planning to raise Rs.800 crore through its public issue and the entire amount will be by way of offer for sale, so the full amount will accrue to the shareholder Raymond. Hence the company will not get any money from public issue and all the money will go only to the selling shareholder.
2) Over the years, JK group or the Raymond group has had a strong diversification into unrelated areas. Now it wants to purely focus on its core focus of premium textile retail as well as the real estate development business.
The idea of hiving off the stake in JK Files & Engineering Ltd is to be able to realize the hidden value in these non-core business units, which can be used as a basis of valuation in the future. For now, the company under Gautam Singhania has undertaken a long term plan to restructure and resize its business and focus more on its core competency.
3) Since it is fully an offer for sale, there will be no fresh funds coming into JK Files and Engineering but the stock would get listed and enable the Raymond group to use stock as currency in future. However, being a stake sale by the promoter, there will be no equity dilution or EPS dilution for the core business of JK Files & Engineering and that is the good news. However, the issue will allocate a small portion of the issue as a reserved allocation for the employees as well as to shareholders of the parent Raymond group.
4) JK Files & Engineering Ltd is engaged in the business of manufacturing of precision engineered components for tools and hardware. The products manufactured by JK Files include steel files and drills as well as marketing, sale and distribution of hand tools, power tool accessories and power tool machines.
JK Files & Engineering also has an auto ancillary subsidiary, RPAL, which is engaged in the manufacture of auto components and other related engineering products like ring gears, flex-plates and water pump bearings. Auto components is one of the businesses that Raymond wants to eventually get out of.
5) According to JK Files & Engineering Ltd, one of the big advantages of the company is a strong customer focus. Its current customer base comprises business-to-business (B2B) customers and also business-to-consumer (B2C) customers. Its customer base is currently spread across more than 60 countries across the world and is still growing.
JK Files has key clients located in Asia-Pacific, Africa, Latin America, Europe and North America. The main idea behind the JK Files IPO is to help to deleverage Raymond with a cash boost from the sale. Of course, even after the sale of stake, JK Files & Engineering will continue to remain a material subsidiary of the Raymond group.
6) JK Files & Engineering has seen net profits nearly double in FY21 to Rs.25.57 crore compared to just about Rs.14.3 crore in the FY20 period. This was on the back of strong operating income. However, the revenues fell by -8.44% to Rs.344.25 crore in the same period. JK Files has sustained its profit momentum even in the first quarter of the current ongoing fiscal year FY22.
7) The IPO of JK Files & Engineering Ltd will be lead managed by SBI Capital Markets, DAM Capital Advisors (formerly IDFC Securities) and HDFC Bank. They will act as the book running lead managers or BRLMs to the issue.
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