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The initial public offering (IPO) of Rolex Rings, a forging company, opened for subscription on Wednesday. Under the Rs 731-crore Rolex Rings IPO, which will close on July 30, shares will be offered in a price band of Rs 880-900 apiece.
The public offer is a combination of fresh issuance of shares worth Rs 56 crore and an offer for sale (OFS) by Rivendell PE LLC of up to 75 lakh equity shares worth Rs 675 crore.
Investors will be able to bid for a minimum of 16 shares, estimated at Rs 14,400 at the upper end of the price band, and in multiples thereof.
Proceeds from the fresh issuance will be utilised towards funding long-term working capital requirements and for general corporate purposes. The company will not receive any proceeds from the OFS.
On Tuesday, the company raised Rs 219.29 crore by allotting 24,36,666 shares to anchor investors at the upper price band of Rs 900 apiece ahead of the IPO.
Among the brokerages recommending subscribing to the Rolex Rings IPO are ICICI Direct, Reliance Securities and Ventura Securities, while Choice Broking has assigned a 'subscribe with caution' rating to the issue.
"A sticky clientele, increasing share of business amongst existing customers, improving operational efficiencies led by better utilisation and exit from corporate debt restructuring remain key catalysts for Rolex Rings," said ICICI Direct, which has assigned a 'subscribe' rating to the issue.
Reliance Securities has assigned a 'subscribe' rating to the issue, stating that the company's strong outlook and healthy balance sheet offer comfort.
"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," the brokerage said.
"The company intends to derisk 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 Rolex Rings in reducing its carbon footprint and expanding its profit margins," HDFC Securities said.
"At the higher end of the price band, RRL is demanding a PE valuation of 28.2x. If we normalise the FY21 earnings, the demanded PE valuation comes out to be 39.4x, which we feel is stretched," said brokerage Choice Broking, which has assigned a 'subscribe with caution' rating on the issue.
"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," it said.
Ventura Securities has recommended subscribing to the issue for long-term for a target price of Rs 1,177 (15 times the FY24 earnings).
"The target represents a potential upside of 31 percent from the offer price of Rs 900 over a period of 18-24 months. A better-than-expected recovery in the global economy, a rebound of the domestic automotive industry and the management’s guidance on higher capacity utilisation in the coming years bolster our confidence in improving revenue growth and profitability," it said.
: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)