Rolex Rings IPO Subscription Status: Day 1

Rolex Rings IPO Subscription Status: Day 1

Retail investors fully subscribed shares allocated to them on the first day of Rolex Rings Ltd.’s Rs 731-crore initial public offering.

The Rajkot-based bearings maker is selling shares at Rs 880-900 apiece. The company is valued at Rs 2,950 crore at the upper end of the price band. The IPO comprises a fresh issue worth Rs 56 crore and a Rs 675-crore offer-for-sale by private equity firm Rivendell PE LLC.

Rolex Rings plans to use Rs 45 crore from the fresh issue to augment its long-term working capital requirement.

Prior to the IPO, it has raised Rs 219.29 crore by allocating 24.36 lakh shares to anchor investors at Rs 900 apiece.

The IPO will close on July 30.

Rolex Rings IPO subscribed 2.71 times on Day 1, retail portion booked 5.1 times

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The initial public offering of Rolex Rings, one of the top five forging companies in India, is subscribed 2.71 times on July 28, the first day of bidding. This is the 30th public issue in 2021.

Investors have put in bids for 1.53 crore equity shares against offer size of 56.85 lakh equity shares, the subscription data available on the exchanges showed.

Retail investors seem bullish as their reserved portion is subscribed 5.1 times and that of non-institutional investors is at 74 percent. Qualified institutional buyers have put in bids for 720 equity shares against their reserved portion of 16.24 lakh equity shares.

The automotive components manufacturer is planning to mop up Rs 731 crore through its public issue that will close on July 30. The offer comprises a fresh issue of Rs 56 crore and an offer for sale of Rs 675 crore by Rivendell PE LLC.

The company has already garnered Rs 219.3 crore from anchor investors at higher end of the price band of Rs 880-900 per equity share.

Also read - Rolex Rings IPO opens today: Should you subscribe?

Rolex Rings is one of the top five forging companies in India in terms of installed capacity and a manufacturer and global supplier of hot rolled forged and machined bearing rings, and automotive components for segments of vehicles including 2-wheeler, passenger vehicles, commercial vehicles, off-highway vehicles, electric vehicles, industrial machinery, wind turbines and railways, amongst other segments.

It is a major supplier to some of the leading players including SKF India, Schaeffler India, Timken India, NEI and NRB which together account for 81 percent of the market share of Indian bearing industry.

Also read - Rolex Rings IPO opens today: 10 key things to know about the issue and company

The company has a diverse product portfolio with a wide user base. It has long standing relationships with leading clients both in India and in exports markets which can be leveraged for increased market share and improved product mix with high-margin value added products. It also has unutilised capacity including large tracts of land which can be used to service higher customer volumes using existing infrastructure.

“At the same time, Rolex Rings is also dependent on top 10 clients besides being open to the risk of business loss due to Covid-19. It has high proportion of unutilised capacity, besides the high degree of power and fuel costs. At the upper band of IPO price of Rs 900, it is valued at a P/E multiple of 35 (on recalculated EPS excluding the Rs 25 crore deferred tax credit) which is lower than the industry average of 83,” said KR Choksey Research.

Considering company’s long standing relationships and diverse product portfolio in the wake of not so robust financials, concentrated client base and sub optimal capacity utilisation, the brokerage recommended a ‘subscribe’ for listing gains.

The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Rolex Rings IPO GMP, Subscription Status, Allotment: Should you Invest?

The Rolex Rings Limited initial public offering (IPO) of Rs 731 crore opened on Wednesday and is set to close on July 30. On the first day of the bidding, the Rolex Rings IPO was subscribed 1.37 times as of 11:58 IST, according to Chittorgarh. The public issue had a healthy response from investors as the retail category subscribed a total of 2.64 times and the Non-Institutional Investors (NIIs) booked a subscription of 0.22 times for their category. The Qualified Institutional Buyers (QIBs), however, are yet to bid. Overall, the Rolex Rings IPO has so far been subscribed a total of 1.37 times. In terms of issue lot size and allotment, the size of the issue on the lower end of the spectrum was at 16 shares with an application amount of Rs 14,400. On the higher end, the application amount stood at Rs 187,200 with 208 shares. The retail investors can apply for up to 13 lots at the upper limit.

The IPO comes with a price band of Rs 880 to Rs 900 per equity share and is being classed as a Book Built Issue IPO. On the first day of the IPO opening, the grey market premium (GMP), stands at Rs 460. This indicates that the shares are trading for Rs 1,340 to Rs 1,360 per share on the unlisted grey market, against the established price band. This is also a drop in premium since July 26 when the premium stood at Rs 550 as per information from IPO Watch.

In terms of the investor portions that were reserved, the retail segment had a reservation of 35 per cent. The QIB category had a reservation of 50 per cent, while the NIIs had a 15 per cent reservation quota. The Rs 731 crore issue consists of a fresh issue of Rs 56 crore as well as an Offer for Sale (OFS) of up to 75 lakh equity shares of Rs 10 per equity share, with the total aggregating up to Rs 675 crore.

The Rolex Rings IPO is set to close its subscriptions on Friday, after which the Basis of Allotment will most likely be on August 4. For the unlucky investor, the refunds will be given on the following day, August 5. Similarly, the accreditation of successful bids will be done to the investors’ Demat accounts on August 6. Tentatively speaking, the Rolex Rings IPO listing date will likely be on August 9, 2021.

Should You Subscribe?

The company, which was started in 2003 is among the top five forging companies in India. It specialises in the manufacturing of hot rolled forged and machine bearing rings and automotive components that are used across segments such as passenger vehicles, two-wheelers, commercial vehicles, electric vehicles, off-highway vehicles, industrial machinery, wind turbines, railways to name a few.

The company proposed to use the net proceeds from the Fresh Issue towards funding long-term working capital requirements as well as general corporate purposes, according to an IPO note by HDFC Securities.

The majority of the company’s revenue came from two sources according to an IPO note by Reliance Securities. These sources were bearing rings and auto components. These revenue lines recorded a decline in revenue over the last three fiscals, said the report. The overall revenue and EBITDA came down by 17 per cent and 26 per cent CAGR respectively over FY19-21. Having said that the net profit came in at a robust 21 per cent CAGR over the same timeframe according to the note. The reason behind such a trend is the sharp reduction in finance charges as a result of continued debt reduction and tax credit, which factored into the net profit.

Speaking on the subscription recommendations for the Rolex Rings IPO, Reliance Securities said in the IPO note, “The IPO is valued at 28.2x of FY21 earnings, which appears to be attractive considering peers’ valuations and strong return ratios. Its peers like Bharat Forge and RK Forgings command premium valuations despite generating subpar return ratio compared to RRL. We believe strong outlook for auto ancillary companies especially the forging companies with visible pick-up in demand around the globe should aid RRL to record healthy growth in the ensuing years. Further, possibility of further improvement in balance sheet, industry-leading return ratio and healthy clientele base augur well for the company. Hence, we recommend SUBSCRIBE to this IPO.”

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