Rolex Rings IPO fully subscribed within hours of opening, should you bid for the share sale?
The initial public offer (IPO) of auto components maker Rolex Rings was fully subscribed within hours of opening on Wednesday.
The IPO received bids for 63. 47 lakh shares against issue size of 56. 85 lakh shares, amounting to 1.12 times subscription, according to data available with NSE till 11:25 am.
The category for non-institutional investors was subscribed 7 per cent, while that reserved for retail individual investors (RIIs) was subscribed 2.20 times.
At 2:25 pm, the share sale was subscribed 2.51 times the issue size. Retail investors had put in bids for 4.75 times their allocated portion.
The IPO comprises a fresh issue of up to Rs 56 crore and an offer for sale of up to 75 lakh equity shares.
The share sale will close on July 30.
The IPO carries a price band of Rs 880-900 per share. At the upper end of the price band, the IPO will fetch Rs 731 crore for the firm.
Allotment of shares will done on August 4, 2021 . The stock is likely to be listed on August 9,2021.
A retail investor can buy a minimum of 16 shares or one lot during the IPO by spending Rs 14,400. A maximum of 208 shares or 13 lots can be bid for in the share sale by spending Rs 1,87,200.
On Tuesday, Rolex Rings garnered a little over Rs 219 crore from anchor investors. Currently, promoters hold 58.99% stake in the firm which will be reduced to 57.64% after the IPO.
Proceeds from the fresh issue will be used towards funding long-term working capital requirements as well as general corporate purposes.
Equirus Capital, IDBI Capital Markets and Securities and JM Financial are the managers to the share sale.
Choice Broking has given a subscribe with caution call for the IPO.
“Coming to the valuation, at higher price band of Rs 900, RRL is demanding a P/E valuation of 28.2 times (to its restated FY21 EPS of Rs 31.9). If we normalise the FY21 earnings (i.e. apply a tax rate of around 17%), the demanded P/E valuation comes out to be 39.4 times, 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,” the brokerage said.
“The company would exit from the corporate debt restructuring scheme in March 2022, which would offer the company flexibility in managing borrowings and taking other business related decisions,” said Sharekhan.
The brokerage further said the company significantly improved its financial profile with debt-equity ratio improving from 3.23 times as of March 31, 2018, to 0.70 times as of March 31, 2021, which is also reflected in the credit rating CARE BB, Outlook Stable.
“The company’s strong, established relationships with leading original equipment manufacturers (OEMs), improved outlook of automobile industry, robust forging capabilities and gain from its manufacturing locational advantages would help in improving growth prospects in the coming years,” said Sharekhan.
HDFC Securities in a note said, “The company intends to de-risk its business dependence on changes in power tariffs and reduce its carbon footprint through investment in renewable energy. As on date, the company operates windmills with installed capacity of 8.75 MW. It is in the process of expanding capacity of its solar projects by an installed capacity of 16 MW and has already placed purchase orders for equipment with installed capacity of 7.35 MW. The proposed expansion will help RRL in reducing its carbon footprint and expanding its profit margins.”
Based in Rajkot, Gujarat, Rolex Rings is among the leading manufacturers of forged and machined components in the country.
