Rolex Rings’ IPO to help company focus on growth and come out of corporate debt restructuring

• Rolex Rings is looking to raise ₹731 crore through public listing.
• The Rajkot-based company is a manufacturer and global supplier of forged and machined components.
• The company’s IPO opens on July 28 and closes on July 30.
• The IPO will see its biggest shareholder Rivendell PE selling 28% stake in the company out of 41% current shareholding.

Automotive components manufacturer Rolex Rings’ initial public offering (IPO) has opened and the company is looking to raise ₹731 crore through the public listing, of which only ₹56 crore is fresh issue.

While analysing the Rolex Rings’ financials, it is evident that the company is under a corporate debt restructuring (CDR) cell as it was unable to pay its debt on time to banks and financial institutions.

The company had approached the corporate debt restructuring (CDR) cell for restructuring debt in the financial year 2013. CDR is a scheme evolved by the RBI wherein it reduces the burden of debts on the company by decreasing the rates paid and increasing the duration of the debt.

The company had a restructured term debt of ₹4,87 crore. As on March 31, 2021, the percentage of the restructured term debt still due is 6.89% amounting to ₹33 crore. “In the first quarter of FY22, the company has paid about ₹10.5 crore and the remaining will be paid in the next couple of quarters. Before March 2022, we should be out of CDR,” said Doshi.

Despite investments coming in, the company has made certain delayed repayment of loans and interest in FY18 and FY19 to financial institutions and banks to the extent of ₹103 crore and ₹37 crore respectively.

“We had certain defaults or rather not defaults, but delays from long term obligations, for example it is due on January 1 and we paid on January 3 or something like that. This is mainly because of working capital squeeze. Our revenue has gone up significantly, but our working capital limits by the lender and has not been increased because many of our lenders are under prompt corrective action (PCA) so that is why we had a bit delay,” said Hiren Doshi, chief financial officer (CFO) of Rolex Rings in an interview with Business Insider.

Under the PCA regime by the Reserve Bank of India (RBI), business restraints are imposed on struggling banks. Under PCA, banks are asked to reduce loan concentration to individual, group, sector, and company which means they cannot lend more loans to particular sections.

“We cannot assure you that we will be able to make future payment of interest and repayment of borrowings in a timely manner or at all and that the relevant lenders will not impose, among others, default interest, penalties or termination of the facilities,” the company said in its red herring prospectus (RHP).

From November 2018 onwards, the company did not have any single delays and even paid six months’ dues in advance before covid, Doshi added.

Source: Red Herring Prospectus

Further, the company will utilise the net proceeds of the IPO towards funding long-term working capital requirements and for general corporate purposes. This way the company will have enough funds for working capital requirements which will probably lower down the chances for any further delays.

While the automotive components manufacturer is looking to raise ₹731 crore through the public listing, only ₹56 crore is fresh issue.

The company’s biggest shareholder Rivendell PE, which currently holds 41% stake or 1.09 crore shares, will sell 28% or 75 lakh shares through the IPO.

In 2007, Rivendell had invested ₹151 crore in the company and thereafter it made an additional investment of ₹12.5 crore in 2011 totalling to ₹163.50 crore.

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