Leading forging company Rolex Rings shares had a bumper debut as the stock listed with a premium of 33 percent over issue price of Rs 900 per share on August 9.
The stock opened at Rs 1200 on the BSE.
The listing was in line with analyst expectations considering its massive grey market premium of 50 percent, stellar subscription numbers, favourable secondary market conditions, sticky clientele and positive outlook over bearing rings and auto components industry.
The Rs 731-crore public issue of the automotive components manufacturer had seen overwhelming response from investors as it was oversubscribed by 130.44 times during July 28-30. The portion set aside for qualified institutional buyers was subscribed 143.58 times, non-institutional investors portion was booked 360.11 times and the retail portion witnessed 24.49 times subscription.
The offer had comprised a fresh issue of Rs 56 crore and an offer for sale of Rs 675 crore by Rivendell PE LLC. The company will utilise the net proceeds from fresh issue for working capital requirements.
Majority of brokerage houses had recommended a subscribe rating for Rolex Rings IPO. "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 KRChoksey Research.
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Considering the 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.
Nirmal Bang also recommended subscribing to the issue, from a long term perspective.
"Rolex is a proxy play on global growth in the industries of bearings and auto components. With global as well as domestic industrial investment cycle having troughed out last year, we expect a gradual recovery to have a positive rub-off on auto ancillary plays such as Rolex. We observe that Rolex's financial metrics as well as valuations are broadly in line with that of other players. The historical growth is lagging others which is compensated by the company's higher return ratios," the brokerage reasoned.
Rolex Rings is one of the top five forging companies in India, designing, manufacturing and supplying hot rolled forged and machined bearing rings, and automotive components for vehicles including two-wheelers, passenger vehicles, commercial vehicles, off-highway vehicles, electric vehicles, industrial machinery, wind turbines and railways.
Rolex supplies its products to leading bearing manufacturers such as SRF India, Schaeffler India and Timken India which account to 81 percent of the market share of Indian bearings industry.
Rolex has three manufacturing plants in Rajkot with 22 forging lines, from where it supplies its products to over 60 customers in 17 countries, primarily located in India, US and EU countries. Its overseas revenue formed 56 percent of total 70 percent of the 10 largest customers have been with the company for over a decade.
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