Rolex Rings Ltd: Needs to build muscle to withstand global competition
Firstly, the company defaulted on term loans and did an OTS in 2013. Secondly the size of the company is small with revenues of just `600 cr
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Rolex Rings Limited is one of India's top-5 forging companies and key supplier of bearing rings. It has a comprehensive product portfolio which comprises of wheel hubs, shafts and spindles and gears amongst others. It is a Tier-1 supplier to global auto OEMs
Rolex Rings Limited is tapping the capital markets with its fresh issue for Rs 56 crore and an offer for sale of 75 lakh shares in a price band of Rs 880-900. The issue has opened on Wednesday (July 28) and closes on Friday (July 30).
The company has allotted 24,36,666 shares to 15 anchor investors comprising 26 entities. The highest allocation was made to Kotak Mutual Fund, which was allotted 11.30 per cent of the anchor book. This was followed by allotment of 2,44,432 shares or 10.03 per cent to HDFC Mutual Fund, SBI Mutual Fund and ICICI Prudential Mutual Fund. The top-4 anchor investors were allotted 51.52 per cent of the anchor portion.
Rolex Rings Limited in 2013 had done an OTS (one time settlement) with its lenders. Surprisingly the PE investor chose not to participate in this settlement and only the promoter family participated in the same. There are some quarterly instalments which are yet to be repaid, but are not due as yet.
Rolex Rings Limited is one of India's top-5 forging companies and key supplier of bearing rings. It has a comprehensive product portfolio which comprises of wheel hubs, shafts and spindles and gears amongst others. It is a Tier-1 supplier to global auto OEMs. Rolex Rings has almost all leading bearing manufacturers as its clients. These bearings are used in various user industries such as automotive, railways, industrial infrastructure and renewable energy amongst others. The company has its units in Rajkot, Gujarat.
The company has long standing relationship with its customers and is also working on products to be used in the EV industry. It would act as a Tier-2 supplier in this industry based on the nature of components that would be supplied by Rolex.
The company exports about 55 per cent of its products, while about 45 per cent comes from within India. Pandemic has hit the company hard and its revenues were affected in the first quarter of FY21. Things have recovered since then and the company is back on track and should going forward be able to match its top line of FY19. The margins at the EBITDA and PAT level are decent and with continuous repayment under the OTS settlement, the debt burden reducing is helping in saving of interest cost and thus improving net margins.
The company reported revenues of Rs 616 cr for FY21 with a net profit of Rs 86.95 cr. The EPS for the year ended March was Rs 36.25 and on a diluted basis was Rs 35.96. On a fully diluted basis the EPS has further reduced to Rs 32.6. The PE band at these earnings is 26.99-27.60. There are a couple of points which investors should keep in mind while investing. Firstly, the company had defaulted on term loans and did an OTS in 2013. Secondly the size of the company is small with revenues of just over Rs 600 cr. The company needs to build muscle to withstand the vagaries of the economy and global competition.
The issue offers some listing pop and retail investors may subscribe to the issue with selling on day one if shares are allotted. For investment in the longer term, a fresh look should be taken once the quarterly results are announced.
(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)
