Rolex Rings IPO sails through on day 1; should you subscribe?

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The initial public offer (IPO) of Rolex Rings got fully subscribed on the first day of the bidding process on Wednesday. The public offer received bids for 96,68,064 shares till 12.50 pm (IST) against 56,85,556 shares offered by the company. The quota reserved for retail investors was subscribed by over 2.50 times so far. The company is aiming to raise around Rs 731 crore from the public offer.

Rolex Rings on Tuesday said it has collected around Rs 219 crore from anchor investors. It has fixed a price band of Rs 880-900 per share for the initial share sale, while will conclude on July 30. Rolex Rings would utilise the proceeds from the fresh issue towards funding long-term working capital requirements as well as general corporate purposes. Most analysts are positive about the company’s future prospects and suggest subscribing to the issue. They believe that the company is one of the leading forging manufacturers with a geographically diversified revenue base and is available at a reasonable valuation as compared to its peers.

Here is what the market watchers have to say about the issue:

Marwadi Shares and Finance | Rating: Subscribe (With Caution)

Considering the FY-21 adjusted EPS (earnings per share) of Rs 31.93 on a post-issue basis, the company is going to list at a P/E of 28.19 with a market cap of Rs 245 crore, while its peers namely Ramkrishna Forgings and MM Forgings are trading at a P/E of 123.30 and 37.14, respectively.

Marwadi Shares and Finance has assigned a “Subscribe (With Caution)” rating to the issue as the company is one of the leading forging manufacturers with a geographically diversified revenue base and is available at reasonable valuation as compared to its peers. However, the client concentration risk and corporate debt restructuring in the past keeps us cautious at the same time from a longer-term perspective.

GEPL Capital | Rating: Subscribe

The Indian bearing industry accounts for less than 4% of the global bearing market, though its share is expected to grow over the medium to long term, supported by increasing industrialisation as well as a healthy growth expected in the automotive market.

While, the entry barrier is relatively lower for smaller bearing rings with high tolerances, the technological know-how, as well as manufacturing capabilities, becomes a differentiating factor as complexity/size of bearing increases

Dilip Davda | Rating: Subscribe

Though Rolex Rings’ top line has shown declining trends, its higher earnings following deferred tax and other provisions and reasonable pricing make it is a worthy bet for short to long-term rewards. The company will be a debt-free company in the near term and will pose for bright prospects ahead once normalcy is restored. Off late, we are also witnessing fancy for forging companies. Investment may be considered.

Sharekhan

At the IPO price band of Rs 880-900, the offer is valued at 24.5/25 times its FY2021 EPS considering the diluted equity at the upper and lower price band. The company significantly improved its financial profile with debt-equity ratio improving from 3.23 times as on March 31, 2018, to 0.80 times as of September 30, 2020, which is also reflected in the credit rating CARE BB, Outlook Stable. The company’s strong, established relationships with leading original equipment makers, improved outlook of the automobile industry, robust forging capabilities and gain from its manufacturing locational advantages would help in improving growth prospects in the coming years.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)