It’s raining IPOs once more! Rolex Rings Limited has decided to get listed. Its IPO begins today on July 28 and ends on July 30. Rolex Rings makes bearing rings and automotive components that are used in all sorts of vehicles as well as other industrial processes. The company has big names like Ford and General Motors on its client roster.
A bearing ring comes in all shapes and sizes. It is used in cranes, axles of vehicles, and even at a baggage belt at the airport. India’s bearing market is worth Rs 12,000 crore, with close to 60% of total demand being met domestically and 40% through imports.
Can a company specialized in making something as common as a bearing ring make it up in the capital markets? In this piece, we explore what the company does, and what it has to give to its investors.
What Does Rolex Rings Do?
A family-run firm started in 1975, Rolex Rings Limited is in the business of making hot rolled forged and machined bearing rings, and automotive components. These are used in two-wheelers, passenger vehicles, commercial vehicles, off-highway vehicles, electric vehicles (EVs), industrial machinery, wind turbines and railways, amongst other segments.
It is one of the top five forging companies in India, the largest being Bharat Forge. Forging and Machining are processes used to shape metals or strengthen them according to industrial needs. Rolex Rings makes forged components for use in the automotive industry and other industrial applications.
Rolex Rings is based in Rajkot, Gujarat. The company has three manufacturing facilities based in Rajkot itself, with an annual achievable capacity of 144,750 million tons per annum (MTPA) in forging and 6.9 crore parts per annum in machining.
Bearing Rings contribute nearly ~53% and Automotive Components nearly ~37% to the total revenue of the company. In 2021, the top 10 customers contributed nearly 72.6% to the total revenue.
Exports accounted for nearly ~56% of the total revenue. Globally, Rolex Rings caters to nearly 60 clients across 17 countries like the USA, France, Germany, Italy, Thailand.
How Strong Is Rolex Rings’ Financial Position?
Between 2019 and 2021:
- Total Assets Increased by ~2%
- Total Revenue Decreased by ~32%
- Profit After Tax Increased by ~47%
- Total Debt fell by ~35% from Rs 385 crore in 2019 to Rs 250 crore in 2021
A close look at the other listed forging companies reveals that Bharat Forge is the largest competitor in terms of revenue. However, Rolex tops the list when it comes to Return on Net Worth it offers. Its Price To Earnings ratio, based on the issue price is anywhere between 23-28x, which is moderate compared to industry peers.
- The company has had issues paying back its lenders in the past. It defaulted on loan payments in 2013 and entered corporate debt restructuring (CDR) with public sector banks. The company has also delayed repaying working capital and interest in the past.
- Top 10 customers contribute nearly ~73 percent to total revenue. Such a concentration in the client base is a risk in case the company has a fallout with some.
- Close to ~56% of the revenue comes from abroad. In case of fierce competition or adverse conditions, the company’s balance sheet can be impacted.
- The promoters of the company have pledged their shares to take other loans. In case they fail to pay these loans, the shares can be transferred to someone else. This can have an adverse impact on the financial and operational condition of the company.
The company has said that it is going to use Rs 45 crores raised from the IPO for funding long-term working capital requirements and the rest of it for general corporate purposes.
The company has moderately good finances, neither too bad, nor too impressive. The company’s debt history seems a little dicey. Yet, the company has its presence in the international market as well. If the economy recovers faster from the economic impact of the second wave of COVID-19 and the third wave is evitable, the company can benefit from an increase in automobile sales and industries reopening.
The GMP or Grey Market Premium of Rolex ring is anywhere between Rs 450 to Rs 500. This means that the shares traded at Rs 500 more than the expected listing price. It seems that the company has received some good interest in the Grey Market.
Are you going to apply for the IPO? Do you think the company can give some really good returns? You can let us know in the comment section available in the marketfeed app available exclusively for Android and iOS.