Rolex Rings is one of the top five forging companies in India. They make bearing rings, parts of gearboxes, and automotive components such as wheel hubs, shafts and spindles. The company offers these supplies both domestically and internationally to some of the leading bearing manufacturing companies. They are also the tier-I suppliers to global auto companies and some auto OEMs. Some of the strengths of the company include the fact that they have a geographically diversified revenue base, and they have a strong and consistent financial performance track record. What’s more impressive is that they have managed to maintain long-standing relations with their customers. In fact, 70% of their 10 largest customers for Fiscal 2021 have been with them for over 10 years.
On August 9, the company’s stock is expected to debut on both the BSE and NSE. The stock is anticipated to list at a 45-50 percent premium over the final issue price of Rs. 900. When the company first announced its IPO, there was an overwhelming response – Rolex Rings was subscribed 130 times as of July 28-30. All this, thanks to the high demand from HNIs and institutional investors during the three-day process. The company raised Rs 731 crores from its IPO that included a fresh issue of Rs 56 crores, as well as an offer for sale of 675 crores by Rivendell PE LLC. The proceeds from the issue will be utilised for working capital requirements.
This is interesting considering that the company does not have strong cash flows and revenues are falling. The goal behind the IPO, then, is to reduce long-term borrowings to support the bottomline. In fact, Rolex Rings is under a corporate debt restructuring (CDR) cell as it was not able to pay its debt on time to banks and financial institutions. The grey market premium (GMP) on Rolex Rings’ shares had come down to a little over ₹1,300 a share compared to the near ₹1,450, which was the price before the IPO. It is known that grey market premium, more often than not, affects the price at which the shares are likely to list.
A few things to consider before investing in the company is that Rolex Rings is heavily dependent on the performance of the automotive sector in India, Europe, North America, Latin America and some part of Asia. Any slight changes in the conditions affecting these countries and markets can adversely impact Rolex Rings’ business, operations, cash flows and financial conditions. Secondly, the impact of the outbreak of the COVID-19 could have a significant effect on the company’s operations, and could negatively alter their financial performance. Also, Rolex Rings is heavilly dependent on their top 10 customers for their revenues. Any unfavorable decision taken by these clients would significantly impact financial numbers.