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Salient features of the IPO:

* Rolex Rings Ltd. (RRL), one of the top five forging companies in India, is planning to raise up to Rs. 730cr through an IPO, which opens on 28th Jul. and closes on 30th Jul. 2021. The price band is Rs. 880 - 900 per share.

* The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, Rs. 45cr will be utilized to fund the working capital requirement of the company and residual funds will be used for general corporate purposes.

Key competitive strengths:

* A comprehensive product portfolio

* Manufacturing capabilities which offer scale, flexibility and locational advantage

* Long standing customer relationships and geographically diversified revenue base

* Experienced promoters and management team with strong domain expertise

* Strong financial performance over the past three years

Risk and concerns:

* Continued subdued global economic environment

* Unfavorable government policies

* Difficulties in new client addition

* Inability to expand the capacity utilization

* Unfavorable forex movements

* Competition

Below are a few key observations of the issue:

* Bearing rings form one of the most critical and largest raw material cost for the bearings sector and the market is estimated at Rs. 2,200cr, which is around 18.3% of the domestic bearing market. Rings are manufactured using tubes, cold-drawing of steel bars or by forging process. Forged bearing ring market is estimated to be at Rs. 1,100cr and is mainly used in critical applications.

* In terms of installed capacity, RRL is one of the top-five forging companies in India. It is a manufacturer and global supplier of hot rolled forged & machined bearing rings and automotive components for almost all segments of vehicles. The company supplies domestically and internationally to large marquee customers including some of the leading bearing manufacturing companies, tierI suppliers to global auto companies and auto OEMs.

* Its product portfolio includes a wide range of bearing rings, parts of gear box and automotive components, among others. The company has offered a diverse range of hot forged and machined alloy steel bearing rings weighing from 0.01kgs to over 163kgs, and with inner diameter of 25mm to outer diameter of 900mm. This makes its products suitable for a wide range of end-user industries such as automotive, railways, industrial infrastructure, and renewable energy, among others.

* As of 21st Jul. 2021, RRL had 22 forging lines with a combined installed capacity of 0.14mn tonnes per annum. Its machining facilities consists of 528 spindles with a combined installed capacity of 69mn parts per annum and other machinery including heat treatment furnaces, cold rolling machines and other infrastructure.

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