IPO Analysis: Rolex Rings Ltd

Abhinav Lahoti
/ Categories: Mindshare, IPO Analysis
IPO Analysis: Rolex Rings Ltd

IPO rating: Avoid     

 About the issue:      

Incorporated in 2003, Rolex Rings is among the top five forging companies in India. The company is coming out with its initial public offering (IPO) of equity shares with a face value of Rs 10 per equity share. The issue size of the company is Rs 731.00 crore, with a fresh issue comprising Rs 56.00 crore while the remaining include the sale of shares worth Rs 675 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 880 to Rs 900 per equity share. The IPO opening date is July 28, 2021, while it will be closing on July 30, 2021. The issue will be listed on the exchange on August 09, 2021. The IPO market lot size is 16 shares. A retail-individual investor can apply up to a maximum of 13 lots (208 shares or Rs 1,87,200). The net proceeds generated from the IPO will be utilised towards funding long-term working capital requirements and also, for meeting its general corporate purposes.    

 Rolex Rings IPO details  

IPO opening date  

July 28, 2021  

IPO closing date  

July 30, 2021  

Issue type  

Book built issue IPO  

Face value  

Rs 10 per equity share  

IPO price  

Rs 880 to Rs 900 per equity share  

Market lot  

16 shares  

Min order quantity  

16 shares  

Listing at  

BSE & NSE  

Issue size  

[.] equity shares of Rs 10
(aggregating up to Rs 731.00 crore)  

Fresh issue  

[.] equity shares of Rs 10
(aggregating up to Rs 56.00 crore)  

Offer for sale  

7,500,000 equity shares of Rs 10
(aggregating up to Rs 675.00 crore)  

  

About the company:     

The company, being established in 2003, manufactures hot rolled forged & machine bearing rings as well as automotive components that are used across various segments i.e. passenger vehicles, two-wheelers, commercial vehicles, electric vehicles, off-highway vehicles, industrial machinery, wind turbines, railways, etc. It is among the top five forging companies in India. It offers a wide range of product such as automotive parts, hot forged and machined alloy steel bearing rings weighing from 0.01 kg to 163+ kg, which caters to different industries mainly automotive, industrial infrastructure, railways, and renewable energy.  

The company supplies its products in both the domestic as well as international markets to automotive companies and leading bearing manufacturers such as SRF India, Schaeffler India, Timken India, etc. In the fiscal year 2020, it has exported bearing rings and automotive components to 17 different countries including France, Italy, Germany, Thailand, Czech Republic, USA, and others. The company has three manufacturing plants in   in Rajkot with 22 forging lines with an aggregated installed capacity of 1,44,750 MTPA.

Competitive strengths:     

Among the leading forging companies in India. 

Strong manufacturing capabilities. 

Comprehensive product portfolio. 

Geographically diversified revenue base. 

Strong and consistent financial performance track record

Financials:    

The financials of the company are not strong enough with the revenue declining by 16 per cent per annum for the last two years. The total assets of the company also have been volatile with a flattish increase in the total assets during the same period. Although the PAT has shown an increase of 23.6 per cent per annum in the last two years, this was majorly due to adjustments in the tax expenses by the company.  

 

Summary of financial information (restated consolidated)  

Particulars  

For the year/period ended (Rs in crore)  

 

31-Mar-21  

31-Mar-20  

31-Mar-19  

   

Total assets  

796.92  

686.17  

782.25  

   

Total revenue  

619.75  

675.33  

911.25  

   

Profit after tax  

86.95  

52.94  

59.04  

   

   

Recommendation:      

The company’s product portfolio includes a wide range of bearing rings, parts of gearbox, and automotive components, among others. It is one of the key manufacturers of bearing rings in India and caters to most of the leading bearing companies in India. The company intends to de-risk its business dependence on changes in power tariffs and reduce our carbon footprint through investment in renewable energy. Currently, the company operates windmills with an installed capacity of 8.75 MW. The company is in the process of expanding its capacity of solar projects by an installed capacity of 12 MW and has already placed purchase orders for equipment with an installed capacity of more than 7.35 MW. The company has defaulted in payment of certain loans in the past and has undergone CDR. It is heavily dependent on the performance of the automotive sector in India, Europe, North America, Latin America, and some parts of Asia. Meanwhile, its top ten customers account for a substantial share of the company’s total revenue. Any adverse changes in the conditions affecting these markets or companies can adversely impact its business, results of operations, cash flows, and financial condition. The company’s logo is not registered, and failure to protect the company’s intellectual property may adversely affect its reputation, goodwill, and business operations, resulting in massive losses. The continuing impact of the outbreak of the COVID-19 can have a significant effect on its operations, and will negatively impact its business, revenues, financial condition, cash flows, and results of operations. The rising crude oil prices and increasing tax rates in India are a matter of concern for the automotive industry. Also, the major focus of the government on the electric car segment adds to the further concern. Owing to the above reasons, we recommend avoiding investing in this company's IPO. 

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