Please refer to important disclosures at the end of this report
1
Rolex Rings Ltd. is one of the five largest forgings companies in India in terms of
installed capacity and is a key supplier of bearing rings catering to leading bearing
manufacturers in India. It has a comprehensive product portfolio and supplies
bearing rings and automotive components for vehicles, industrial machinery, wind
turbines and railways, etc. It has 22 forging lines with total installed capacity of
1,44,750 MTPA and 528 spindles with capacity of 69 Mn parts PA. Rolex Rings has
a longstanding relationship with its clients, a comprehensive product portfolio
having wide application, and has presence across geographies with ~56% of
revenues from outside India. The company is expected to exit CDR in March 2022.
Positives: (a) Comprehensive product portfolio that limits dependency on single
product, aids in attracting new customers and increase wallet share. (b)
Manufacturing capabilities which offer scale, flexibility, and locational advantage.
(c) Long standing customer relationships and geographically diversified revenue
base (d) Significant improvement in financial profile over the last three years.
Investment concerns: (a) The company in past had defaulted in payment of certain
loan facilities and restructured term debt amounted to ₹487 crores (b) Enforcement
of pledge by the lenders will reduce the shareholding of Promoters (c) Top 10
customers accounted for a substantial majority (~70%) of revenues over the past
few years. (d) Continuing impact of the COVID-19 could have a significant effect
on operations & financial condition.
Outlook & Valuation: Rolex Rings was progressing well before the auto slowdown
and Covid impacted its business in FY20 and FY21. The company is almost out of
CDR and had shown good operational performance prior to FY20 with good cash
generation helping it reduce debt levels. It orders from customers are high volume
orders and are not very critical in nature as far as application is concerned.
Given that the MAT credit of ~`25 crores has boosted the bottom line in FY21, we
believe that valuations are capturing all positives. Moreover, we believe that
promoters picking up ~25 LK shares at Rs 10 per share prior to issue via right
issue of OCRPS and subsequent conversion is detrimental to other shareholders.
Hence, we assign “Neutral” to the issue.
Key Financials
Y/E March (` cr)
FY2018
FY2019
FY2020
FY2021
Net Sales
770
904
666
616
% chg
-
-
-26.4
-7.5
Reported Net Profit
87
59
53
87
% chg
-
-
-10.3
64.2
EBITDA (%)
20.9
22.2
18.2
17.7
EPS (`)
30.4
21.7
19.4
31.9
P/E (x)
29.6
41.5
46.3
28.2
P/BV (x)
15.7
11.4
9.1
6.9
ROE (%)
106.0
31.8
21.9
27.8
ROCE (%)
33.9
12.2
13.6
17.7
EV/EBITDA
18.3
14.1
22.2
24.7
EV/Sales
3.7
3.1
4.0
4.4
Source: Company, Angel Research.
Note: Valuation ratios at upper price band.
NEUTRAL
Issue Open: July 28, 2021
Issue Close: July 30, 2021
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 57.6%
Others 42.4%
Post Issue Shareholding Patter n
Post Eq. Paid up Capital: `24.6cr
Issue size (amount): `731 cr
Price Band: `880-900
Lot Size: 16 shares and in multiple thereafter
Post-issue mkt. cap: * `2,398 cr - ** `2,451 cr
Promoters holding Pre-Issue: 58.99%
Promoters holding Post-Issue: 57.64%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: `56 cr
Rolex Rings Ltd.
f
IPO NOTE ROLEX RINGS LTD.
July 27, 2021
Rolex Rings Ltd | IPO Note
July 27, 2021
2
Company background
Incorporated in 2003, Rolex Rings Ltd is one of the top five forging companies in
India (Source: ICRA Report) and a manufacturer and global supplier of hot rolled
forged and machined bearing rings, and automotive components for segments of
vehicles including passenger vehicles, commercial vehicles, two-wheeler vehicles
and off-highway vehicles and electric vehicles. They are one of the key
manufacturers of bearing rings in India (Source: ICRA Report) and cater to most of
the leading bearing companies in India. They supply domestically and
internationally to large marquee customers including some of the leading bearing
manufacturing companies, tier-I suppliers to global auto companies and auto
OEMs. They have supplied bearing rings and automotive components to over 60
customers in 17 countries and ~70% of 10 largest customers have been
associated with the company for a decade.
Issue details
The issue comprises of offer for sale of up to `731 crore and Fresh issue of `56 Cr
in the price band of `880-`900.
Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
1,56,96,667
59.0
1,56,96,667
57.6
Public
1,09,14,423
41.0
1,15,36,645
42.4
Total
2,66,11,090
100.0
2,72,33,312
100.0
Source: Company, Angel Research & RHP.
Objectives of the Offer
₹45 Cr towards long-term working capital requirements of the company
General corporate purposes.
Key Management Personnel
Manesh Dayashankar Madeka is the Chairman and Managing Director. He
together with Rupesh Dayashankar Madeka started the business under the
partnership firm by the name of Rolex Industries in 1978.
Bhautik Dayashankar Madeka is the Whole Time Director. He has over 18 years of
work experience in production, planning and control. He joined the company on
December 31, 2002 when it was still a partnership firm.
Vivek Sett is the Nominee Director. He was previously associated with Ispat
Industries as its director (commercial) and Tata Realty & Infrastructure, Tata
Teleservices Ltd and Hughes Telecom (India) Ltd as their chief financial officer. He
is currently a Partner at New Silk Route Advisors.
Hiren Dilipbhai Doshi is the Chief Financial Officer of the company. Prior to
joining the company, he worked with Atul Auto Ltd for over 11 years.
Hardik Dhimantbhai Gandhi is the Company Secretary and Compliance Officer.
He has over 5 years of experience in legal and secretarial compliance.
Rolex Rings Ltd | IPO Note
July 27, 2021
3
Exhibit 1: Consolidated Profit & Loss Statement
Y/E March (` Cr)
FY2018
FY2019
FY2020
FY2021
Total operating income
770
904
666
616
% chg
-
-
-26.4
-7.5
Total Expenditure
609
703
545
507
Cost of materials consumed
372
453
314
317
Purchases of stock-in-trade
-
-
-
-
Changes In Inventories
(7)
(19)
16
(29)
Employee benefits expense
55
61
53
52
Other expenses
190
208
163
168
EBITDA
161
201
121
109
% chg
-
24.9
-39.6
-10.4
(% of Net Sales)
20.9
22.2
18.2
17.7
Depreciation& Amortization
23
25
27
25
EBIT
152
176
95
83
% chg
-
-
-46.0
-12.1
(% of Net Sales)
19.4
19.4
14.3
13.5
Finance costs
51
42
32
12
Other income
7
7
9
3
(% of Sales)
0.9
0.8
1.4
0.6
Recurring PBT
101
134
63
72
% chg
-
-
-53.0
14.4
Exceptional item
-
-
-
-
Tax
21
82
19
(12)
PAT (reported)
87
59
53
87
% chg
-
-
-10.3
64.2
(% of Net Sales)
11.1
6.5
7.9
14.1
Basic & Fully Diluted EPS (Rs)
30.4
21.7
19.4
31.9
Source: Company, Angel Research
Rolex Rings Ltd | IPO Note
July 27, 2021
4
Exhibit 2: Consolidated Balance Sheet
Y/E March (` Cr)
FY2018
FY2019
FY2020
FY2021
SOURCES OF FUNDS
Equity Share Capital
24
24
24
24
Other equity
132
191
244
333
Shareholders’ Funds
156
215
268
357
Total Loans
505
385
259
250
Other liabilities
19
70
78
53
Total Liabilities
681
671
605
660
APPLICATION OF FUNDS
Property, Plant and Equipment
335
381
373
371
Right-of-use assets
0.1
0
0
0
Capital work-in-progress
40
1
-
1
Intangible assets
1
1
1
1
Non-Current Investments
-
-
-
-
Current Assets
406
368
293
379
Inventories
161
160
131
171
Investments
-
-
-
-
Trade receivables
201
181
128
171
Cash and Cash equivalents
16
5
16
10
Loans & Other Financial Assets
14
10
9
7
Other current assets
15
11
9
19
Current Liability
123
112
81
137
Net Current Assets
283
256
212
241
Other Non-Current Asset
22
31
19
45
Total Assets
681
671
605
660
Source: Company, Angel Research
Rolex Rings Ltd | IPO Note
July 27, 2021
5
Exhibit 3: Consolidated Cash flows
Y/E March (`cr)
FY2018
FY2019
FY2020
FY2021
Operating profit
94
141
72
75
Net changes in working capital
(22)
25
75
(43)
Cash generated from operations
141
229
206
65
Direct taxes paid (net of refunds)
(5)
(35)
(22)
(6)
Net cash flow from operating activities
136
194
184
59
Purchase of Assets
(36)
(37)
(16)
(39)
Interest received
1
1
2
1
Others
3
(0)
(0)
2
Cash Flow from Investing
(32)
(36)
(14)
(36)
Repayment (long term borrowings)
(56)
(91)
(87)
(2)
Repayment (short term borrowings)
(14)
(26)
(48)
(10)
Proceeds from issue/repayment debentures
-
-
-
-
Interest paid
(50)
(41)
(34)
(11)
Interest on Lease liabilities
-
-
-
-
Others
(0)
0
(0)
3
Cash Flow from Financing
(121)
(158)
(169)
(20)
Inc./(Dec.) in Cash
(17)
(1)
1
3
Opening Cash balances
18
1
0
-
Closing Cash balances
1
0
1
3
Source: Company, Angel Research
Rolex Rings Ltd | IPO Note
July 27, 2021
6
Key Ratios
Y/E March
FY2018
FY2019
FY2020
FY2021
Valuation Ratio (x)
P/E (on FDEPS)
29.6
41.5
46.3
28.2
P/CEPS
23.1
29.0
30.8
21.8
P/BV
15.7
11.4
9.1
6.9
EV/Sales
3.7
3.1
4.0
4.4
EV/EBITDA
18.3
14.1
22.2
24.7
Per Share Data (Rs)
EPS (Basic)
30.4
21.7
19.4
31.9
EPS (fully diluted)
30.4
21.7
19.4
31.9
Cash EPS
39
31
29
41
Book Value
57
79
98
131
Returns (%)
ROE
106.0
31.8
21.9
27.8
ROCE
33.9
12.2
13.6
17.7
Turnover ratios (x)
Receivables (days)
94
73
70
101
Inventory (days)
96
83
88
123
Payables (days)
59
47
49
85
Working capital cycle (days)
131
109
108
140
Source: Company, Angel Research
Rolex Rings Ltd | IPO Note
July 27, 2021
7
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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