IPO Alert: All you need to know about JK Files & Engineering’s public listing

The Indian tools and hardware industry is one of the high-growth sectors that makes significant contributions to the country’s GDP. The business involves the manufacturing and distribution of products like steel files, cutting tools, hand tools, power tools and power tool accessories.

The steel files market in India has grown at a compound annual rate of 1-2% over the past four years and the demand is expected to increase 4-5% by 2027. The cutting tools segment is currently growing at an annual rate of 5-6% and it is expected to be around 5-7% in the coming five years.

The hand tools market in India clocked a 6%-7% growth between fiscals 2017 and 2021 and is expected to grow at 8% in the next five years, while the power tools segment is seen expanding at the rate of 5-6%.

Raymond-promoted JK Files & Engineering Ltd has filed a draft paper with the Securities Exchange Board of India to raise around ₹800 crores via an initial public offering. The IPO comprises an offer for the sale of shares by Raymond Ltd, which currently holds a 100% stake in the firm.

JK Files & Engineering will not receive any proceeds from the offer, rather the amount will go to the selling shareholder.

Manufacturing & Distribution

JK Files & Engineering is involved in the manufacturing, sale and distribution of precision engineered components for tools and hardware such as steel files and drills. It also sells hand tools, power tools accessories and power tool machines, besides providing auto components and engineering products such as ring gears, flexplates and water pump bearings through its subsidiary RPAL.

The Mumbai-based company has the largest installed manufacturing capacity and is the second-largest supplier of steel files globally. RPAL is among the key global ring gear players and has the highest volume share in terms of supply to original equipment manufacturers for domestic production of PV and CV.

JK Files & Engineering’s main competitors in the ring gear and water pump bearing markets are Amalgamations Repco Ltd, ARGL Limited, Flywheel Ring Gears Pvt. Ltd, National Engineering Industries Limited and Ring Plus Aqua Ltd.

Key Figures

For fiscal 2021, JK Files reported a total income of ₹349.66 crores, against ₹382.05 crores a year ago. Net profit for the period stood at ₹25.57 crores, against ₹14.30 crores last year. As of June 2021, its net debt stood at ₹25.23 crores.

Since a significant portion of the company’s revenues come from the sale of files and ring gears, it is essential to receive orders consistently to ensure a smooth cash flow.