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IPO Review - Rolex Rings Ltd - ICICI Direct

Posted On: 2021-07-28 17:19:25 (Time Zone: UTC)


Rolex Rings (RRL), one of the top five forging companies in India, commenced operations in 1988 with their first manufacturing plant in Rajkot. The company manufactures and supplies hot rolled forged bearing rings, automotive components (including EVs) for segments of vehicles including 2-W, PV, CV, industrial machinery, wind turbines & railway among other segments. The client base of RRL consists of leading global bearing manufacturers viz. SKF, Timken, Schaeffler, NEI & NRB Bearings. RRL has three manufacturing units in Rajkot consisting of 22 forging lines with a combined capacity of 144750 MTPA and machining facilities consisting of 528 spindles with combined installed capacity of 69 million parts per annum.

Investment Rationale

Key supplier in niche industry wherein clients are sticky

RRL serves 60 customers across 17 countries and is one of the key suppliers for leading bearing manufacturers. The company's comprehensive product portfolio catering to auto, industrial, infra & renewable segments and long standing customer relationship gives credence to the quality and sustainability of RRL's products. As the industrial segment picks up led by increased capex spend by public and private sector coupled with a recovery in auto sector, RRL should see strong traction from bearing manufacturers. The bearing clientele of RRL constitutes ~80% of the total market, hence, ensuring strong traction for RRL once the tide turns.

De-risking financial profile, enhancing efficiency

RRL had entered CDR in 2013. Subsequently, fixed and current assets were secured by encumbrance whereas promoter holdings were pledged. Nonetheless, the company has repaid 95% of its debt (FY21 D/E 0.7x) and is expected to exit CDR before FY22. This should offer flexibility in managing borrowings and taking other business-related decisions. Further, the company is making strides to reduce its carbon footprints and by reducing power costs (~8% of sales) led by investments in renewable energy.

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Source: Equity Bulls

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