JK Files & Engineering Limited (‘JK Files’ or the ‘Company’), the Tools & Hardware and Auto Components subsidiary of Raymond Limited, filed its draft red herring prospectus with SEBI for a proposed initial public offering (IPO) of up to ₹800 crore.
The proposed IPO of JK Files will help to deleverage the parent company Raymond Limited in the form of debt reduction and will lead to value creation. In a statement issued to exchanges in the month of September, the company had stated this consolidation is done for improving synergies and exploring monetization options for deleveraging Raymond Ltd. with an overall objective being value creation for shareholders. JK Files will continue to remain a material subsidiary of Raymond Limited.
JK Files & Engineering Limited is engaged in the business of manufacturing, sale and distribution of precision engineered components for tools and hardware such as steel files and drills, and marketing, sale and distribution of hand tools, power tool accessories and power tool machines, and through its subsidiary, RPAL, manufacturing, sale and distribution of auto components and engineering products such as ring gears, flexplates and water pump bearings.
JK Files generate a significant amount of revenues from various markets, including India, Europe, Latin America, Africa, North America and Asia-Pacific. Their revenues from sale of products from exports contributing 52.99% and 65.58% of proforma total sale of products in Fiscal 2021 and the three months ended June 30, 2021, respectively.
According to the CRISIL Report, the Company has the largest installed manufacturing capacity of steel files with a share of 25%-27% of the global capacity as of 2020 and was the second largest supplier globally of steel files with a market share of 10%-12% of the sales volume in 2020. The Company is also the market leader in the files segment in India with a market share of 64%-66% in India by sales volume in Fiscal 2021. The Company also has a strong presence in the Asian, African and Latin American regions and is the largest brand in the African market with a market share of 50%-55% by volume in steel files in 2020. In addition, the Company is also one of the leading players in the drills segment in India with the market share of 8%-10% in value terms in Fiscal 2021. (Source: CRISIL Report)
RPAL is estimated to occupy the highest volume share of 52%-56% in the domestic passenger vehicle (“PV”) industry and 46%-50% in the domestic commercial vehicle (“CV”) industry in terms of supply to original equipment manufacturers (“OEMs”) for domestic production in Fiscal 2021 and is amongst the key players in the ring gears industry globally. RPAL is the sole domestic manufacturer of flexplates in India and is estimated to cater to 25%-27% of the flexplate volume demand for PV domestic production in Fiscal 2021. (Source: CRISIL Report).
The key competitive strengths of the company includes: Leadership position in complex and high-quality precision engineered and automotive components; Comprehensive product portfolio with wide ranging applications across end-segments and industries; De-risked business model with diversification across geographies, customers and end-segments; Long term and well established relationships with distributors and marquee domestic and global OEMs supported by an extensive distributor network; Strong engineering capabilities with strategically located manufacturing facilities resulting in continuous product development and cost efficiencies; Consistent financial performance; Strong parentage of the Raymond group and experienced senior management team.
The Company primarily sell and market tools and hardware products in India through its umbrella brand, ‘JK SuperDrive’, and in the international markets, through various subbrands including ‘JK Sun Flower’, ‘JK Eye’, ‘JK Three Files’, ‘JK Two Files’, ‘Premium Scissors’, ‘JK Sher’, ‘JK Thunderbolt’, ‘JK Uno’, ‘JK Two Tusk’ and ‘MJK’. ‘JK SuperDrive’ is synonymous with files in India due to its strong brand (Source: CRISIL Report). The Company has entered into strategic alliances with global files and drills companies such as Apex Tools Group, LLC headquartered in the United States for providing end-to-end manufacturing solution for files. In addition, Raymond Limited, the Promoter, entered into an agreement to form a joint venture with MOB Mondelin (French Tool manufacturer), for manufacturing, sale and distribution of files, and the Company has entered into a co-branding arrangement with Yunda International Trading Co Ltd under the brand, ‘JK Cleveland’, in the Indian market for high performance taps in the cutting tool category.
The offer includes a reservation of for subscription by eligible employees (the “Employee Reservation Portion”). The employee reservation portion shall not exceed 5% of the post-offer paid-up equity share capital.
SBI Capital Markets Limited, DAM Capital Advisors Limited (Formerly IDFC Securities Limited) and HDFC Bank Limited are the BRLMs to the Issue.
The equity shares are proposed to be listed on BSE and NSE.
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