This post on Rolex Rings IPO attempts to bring out consolidated brokerage views , subscription information, Grey Market Premium (GMP) and anchor investor information where applicable. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Rolex Rings IPO or not.
Related Posts : Rolex Rings IPO Review
Rolex Rings IPO: Grey Market Premium etc.
- 30-07-21 GMP Rs. 540
- 28-07-21 GMP Rs. 500
Subscription: Rolex Rings IPO ( x times)
| Day / X times | QIB | NII | Retail | Total |
| Day 3 | 143.58 | 360.11 | 24.49 | 130.44 |
| Day 2 | 0.23 | 5.85 | 15.89 | 9.26 |
| Day 1 | 0.00 | 1.34 | 7.11 | 3.84 |
| Total Retail Applications | ~ 3489738 | |||
| Appl wise Retail | 19.64 x |
Consolidated Brokerage Views on Rolex Rings IPO
Angel Broking: “Rolex Rings was progressing well before the auto slowdownand 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.”
Capital Market : ” Score 46/100 ; The EPS for FY2021 was Rs 31.9 and thus on FY2021 EPS the PE works out to about 28.2 times. There is no listed bearing ring manufacturing company and thus the company must be compared with other forging companies. In comparison the Bharat Forge quotes at 113.2 times of its standalone FY2021 EPS. The MM forging and Ramkrishna Forging quotes at a PE of 39.3 times and 127.3 times, respectively, on their consolidated FY2021 EPS.”
Choice Broking: “Coming to the valuation, at higher price band of Rs. 900, RRL is demanding a P/E valuation of 28.2x (to its restated FY21 EPS of Rs. 31.9). If we normalize the FY21 earnings (i.e. apply a tax rate of around 17%), the demanded P/E valuation comes out to be 39.4x, which we feel is stretched. Moreover, it is demanding EV/Sales of 4.3x, which is at premium to the peer average of 3.9x. The overall outlook for bearing rings and auto components industries remains
positive. However, despite its presence in the lucrative industrials segment, the higher demanded valuation is a concern for investors. Thus we assign a “Subscribe with Caution” rating for the issue.”
ICICI Securities Limited: “RRL has been priced at 28.2x FY21EPS on a post issue upper band basis. A sticky clientele, increasing share of business amongst existing customers, improving operational efficiencies led by better utilisation and exit from CDR remain key catalyst for RRL. We recommend SUBSCRIBE to the issue.”
KR Choksey: “At the upper band of IPO price of INR 900, it is valued at a P/E multiple of 35 (on recalculated EPS excluding the INR 25 Cr deferred tax credit) which is lower than the industry average of 83. 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, we recommend a ‘Subscribe’ for listing gains.”
Nirmal Bang : “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. Although there is no direct comparable peer to Rolex, we compare it with prominent forgings and auto component players. 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. Considering these metrics, we recommend subscribing to the issue from a long term perspective.”
Religare: :”Rolex rings is well placed to benefit from growing industry trends due to its comprehensive product portfolio and manufacturing facilities with scale and location advantages. Further, the company has long standing relationship with its customers wherein 70% of its 10 largest customers for FY21 have been with the company for over a decade. Going forward, the company intends to increase its share of business from existing customers by broadening its product portfolios. Additionally, it also intends to expand its customer base by tapping newer geographies. The financial performance has been impacted over FY19-21, however the company has been able to reduce its debt/equity from 1.9x in FY19 to 0.7x in FY21. Going forward, improving growth prospects coupled with company’s increased focus on improving operational efficiency and financial risk profile are key positives for the company. Considering the current market sentiments, investors may subscribe for listing gains in the short term..”
Reliance Securities: “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.”
SMC: “Score 1.5/5 ;
The company is one of the top five forging companies. Though the company derives major revenues from
two sources i.e. Bearing rings and Auto components but over the past three fiscals, both these sources have
posted declining trends in revenues. Moreover the company has defaulted on bank finance in the year 2013
and also delayed some of its repayments till FY2019 and this caused pressure on dividend announcement
by the company. On the valuation front, it looks expensive. Moreover the issue is largely offer for sale. Along
term investor may opt the issue.”
SP Tulsiyan Website: “Small cap stock with aggressive pricing before establishing a performance track record does not provide much comfort. Hence, one can skip the IPO.”
Ventura :”We initiate coverage with a SUBSCRIBE for long term investing. Our target price of INR 1,039 (18X FY24 earnings) represents a potential upside of 44% from the offer price of INR 720 over a period of 18-24 months. The business environment, futuristic product portfolio, success in new product development and planned capacity expansions bolster our confidence in sustaining growth, margins and return ratios over the forecast period
We initiate coverage with a SUBSCRIBE for long term investing. Our target price of INR 1,177 (15X FY24 earnings) represents a potential upside of 31%
from the offer price of INR 900 over a period of 18-24 months. Better than expected recovery in the global economy, a rebound of the domestic automotive industry and the management’s guidance on highercapacity utilization in the coming years bolster our confidence in improving revenue growth and profitability.”
Standard disclaimer: Standard disclaimer: I am not a SEBI registered analyst /investment adviser and above information is collated from various online sources and is for educational purpose only. Please visit individual brokerage sites to read the actual reports. Please do not make your investment decisions based on this info as it is not complete and exhaustive. Please do your own due diligence as stock market investments have high degree of inherent risk.