Rolex Rings - IPO Note


Rolex Rings - IPO Note


Price range
Rs. 880-900
Issue Period:
Jul 28, 2021
Jul 30, 2021
July 27, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 731 cr.
Public Issue
0.81 cr. shares
Market cap post IPO
Rs 2398-2451 cr.
Equity Pre - IPO
2.66 cr.
Equity Post - IPO
2.72 cr.
Issue type
Fresh Issue & OFS

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research


Highly diversified product portfolio:
The company offers a diverse range of hot forged & machined alloy steel bearing rings weighing from 0.01 kg to over 163 kg and with inner diameter of 25 mm to outer diameter of 900 mm and auto components such as wheel hubs, shafts and spindles, gears, etc. The products are suitable for end-user industries such as automotive, railways, industrial infrastructure and renewable energy, among others. This has led to a de-risked business model, thereby helping the company to improve their share of business amongst existing customers along with the ability to attract new customers. The strength in their product portfolio is shown by the fact that they supply domestically and internationally in each of the product segments.

High operational efficiencies with location specific advantages:
The company has made investments in manufacturing plants so as to produce high quality high volume parts in a cost effective manner. The infrastructure also allows them to respond quickly and efficiently to any customer requirements or change in product specifications without the need to depend on any external vendors. This helps them to closely monitor product quality, production costs and delivery schedules. Also, the three manufacturing plants at Rajkot are situated at strategic locations which help Rolex to access the various automotive clusters in North India, West India and South India as well as cater to the export markets through close proximity to the ports of Kandla, Mundra and Pipavav. In order to reduce carbon footprint and avoid dependence on high cost power & fuel (~9% of total revenues in FY21), the company has invested in wind and solar energy. They are in process of setting up a 16 MW ground mounted solar power facility at Taluka Muli (Gujarat)

To leverage relationships with geographically diversified customer base:
The company supplies products domestically and internationally to some of the leading manufacturers of bearings, Tier-I and Tier-II auto-component suppliers and certain auto OEMs. They have over 60 customers in 17 countries, primarily located in India, USA, Germany, France, Italy, Czech Republic and Thailand. 70% of their 10 largest customers for FY21 have been with them for over a decade. The company intends to leverage this relationship and knowledge of requirements & preferences of their customers to develop and supply more complex, higher margin products at competitive prices. The company has recently entered into a multiyear long-term agreement with a leading Tier-I supplier (for supply of components to its plant at Europe) with an estimated annual value of approximately EURO 10 million.

Healthy balance sheet with focus on capacity expansion:
The company has managed to improve its debt-equity ratio from 1.79 in FY19 to 0.71 in FY21 on the back of improved cash flow from operations. Also, the company made total investments of ~Rs 90 cr from FY19 to FY21 towards purchase of property, plant and equipment, intangible assets and capital work in progress. These investments have been made in order to expand their forging and machining capacity, heat treatment facilities, and to purchase equipment for generation of solar energy.


  • High client concentration: For FY21, top 10 clients of the company contributed ~70% of the revenues. A few of the company’s customers belong to the same corporate group although the decision making for each of these customers is largely independent. Loss of any such client could materially impact the company’s operations.
  • Business is working capital intensive: The business requires substantial amount of working capital (Rs 240 cr in FY21), in order to maintain inventory levels of raw materials, components and finished goods. If the company is unable to secure adequate working capital on commercially reasonable terms, business operations as well as financial condition may get adversely affected.
  • Fluctuation in cost of raw materials: For bearing rings and auto-component products, a major component of raw material (~50% of revenues in FY21) is carbon steel, alloy steel and stainless steel. The company is not able to pass on increase in price of raw materials to customers beyond a certain level which could affect the margins dramatically.

Company Description

Rolex Rings, a Gujarat based company, is among the leading manufacturers of forged and machined components. It manufactures high-quality, world-class, customized automotive components as well as bearing rings for a huge base of clientele spread across the globe. Rolex has garnered a wealth of expertise in manufacturing transmission components, engine components, chassis components, exhaust system components and bearing rings that are used across segments i.e. passenger vehicles, 2-wheelers, commercial vehicles, electric vehicles, off-highway vehicles, industrial machinery, wind turbines, railways, etc. The company supplies its products to both the domestic as well as international automotive companies and leading bearing manufacturers such as SKF India, Schaeffler India, Timken India, etc. Currently, the firm has 3 manufacturing plants in Rajkot with 22 forging lines having an aggregated installed capacity of 1,44,750 MTPA, machining facilities consisting of 528 spindles with a combined installed capacity of 69 million parts p.a. and other machinery including heat treatment furnaces & cold rolling machines.


The company in order to expand its business has taken a number of initiatives such as focusing on leveraging its relationship with existing clients to improve the wallet share and also seek referrals, enhancing manufacturing and product portfolio to offer diverse range of products, focusing on improving operational efficiency, reducing power costs and carbon footprint etc. With the revival in economic activity globally supported by Government stimulus, industrial activity and auto industry is set to revive faster than expected which in turn will result in higher growth opportunities for Rolex. At the upper price demand of Rs 900, the IPO is valued at 25x of FY21 earnings, which looks reasonable considering its peers (Bharat forge, MM Forgings, Ramkrishna Forgings) trade at a much higher multiple. Further the company has better return ratios (RoE at ~24% in FY21) compared to its peers. Hence, we recommend SUBSCRIBE to the IPO for long term perspective.

Peer comparison FY19 FY20 FY21
Company Revenue (Rs Cr) EPS ROE (%) Revenue (Rs Cr) EPS ROE (%) Revenue (Rs Cr) EPS ROE (%) PE ratio
Rolex Rings Ltd 904 25 27% 666 22 20% 616 36 24% 25
Bharat Forge Ltd 10146 22 21% 8056 8 7% 6336 (3) - -
Ramkrishna Forgings Ltd 1931 37 14% 1216 3 1% 1289 6 2% 127
MM Forgings Ltd 934 27 15% 769 17 9% 744 19 10% 37

Key Information

Use of Proceeds:
The offer comprises of a fresh issue and an offer for sale. Out of the fresh Issue of Rs 56 crores, Rs 45 crores is proposed to be utilized for working capital requirement of the company and the balance Rs 11 crores is to be used for general corporate purposes. The balance ~Rs 675 crores of the issue would be through offer for sale by the shareholders and proceeds would go to such selling shareholders.

Book running lead managers:
Equirus capital, IDBI capital, JM Financial

Rolex Rings is led by Manesh Madeka, Chairman and Managing Director, having over 40 years of experience in the industry. Their production and planning related business is led by Bhautik Madeka, whole time Director while the marketing functions and the development of new customers and products related business is led by Mihir Madeka, both of whom have over 18 years of experience in the industry.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Yr End March (Rs Cr) FY19 FY20 FY21
Net Sales 904.00 666.00 616.00
Material Cost 434.00 329.00 287.00
Employee Cost 61.00 53.00 52.00
Other Expenses 208.00 162.00 168.00
EBITDA 201.00 122.00 109.00
EBITDA Margin 22.00% 18.00% 18.00%
Depreciation & Amortization 25.00 27.00 25.00
EBIT 176.00 95.00 84.00
Other Income 7.00 9.00 3.00
Interest & Finance Charges 42.00 32.00 12.00
Profit Before Tax - Before Exceptional 141.00 72.00 75.00
Tax Expense 82.00 19.00 -12.00
Effective Tax rate 58.00% 26.00% -
Net Profit 59.00 53.00 87.00
Net Profit Margin 7.00% 8.00% 14.00%