Rolex Rings Limited

Initiating Coverage

Leading bearing component player with superior ROCEs & Free cashflows

September 29, 2021

Ashutosh Tiwari (ashutosh@[Link], +91-079 6190 9517)

Aashin Modi ([Link]@[Link], +91-9726744353)
 India Equity Research | Auto Parts
September 29, 2021
Initiating Coverage

Rolex Rings Limited

CMP Target Price
Rs 1,022 Rs 1,469
Leading bearing component player with
superior ROCEs & Free cashflows
Rating Upside
LONG 44% ()

➢ Rolex is India’s largest supplier of bearing rings - a critical part of bearings Stock Information

➢ Benefitting from increased outsourcing by bearing players globally, ROLEXRIN has a Market Cap (Rs Mn) 27,875
large market opportunity with its current market share only around 2.5-3% globally 52 Wk H/L (Rs) 1,265/1,023

➢ A strong Order Book provides FY23E sales visibility of Rs 12.5bn (we conservatively Avg Daily Volume (1yr) 0
assume sales of Rs 12bn). EVs will contribute 8%/11% of sales in FY22E/FY23E. Avg Daily Value (Rs Mn) 0.0
Equity Cap (Rs Mn) 3,567
➢ With a high cash flow generating model, over FY16-FY21, cumulative operating cash
flow to EBITDA was 86%; with no major capex likely till FY24E, FCF will remain strong. Face Value (Rs) 10
The company has historically enjoyed a strong ROCE; we expect a pre-tax ROCE of Share Outstanding (Mn) 27.2
29%/32% in FY22E/FY23E. Bloomberg Code ROLEXRIN IN

➢ We view ROLEXRIN as a solid 3-year story and see the stock at Rs 1,923 by Mar’24 at Ind Benchmark BSEAUTO
20x Mar’25 EPS. Initiate with LONG rating and a Sep’23 TP of Rs 1,469 at 20x Sep’23
Ownership (%) Recent 3M 12M
EPS.
Promoters 57.6 0.0 0.0
DII 26.1 0.0 0.0
Favorable industry dynamics: outsourcing + import substitution/exports from India: EVs
require more technologically advanced bearings due to a higher RPM and initial pick-up; FII 3.0 0.0 0.0
therefore, bearing companies are focusing more on development and outsourcing bearing Public 13.9 0.0 0.0
parts manufacturing. Industry interactions indicate that some global bearing companies
plan to localize production of industrial bearings which are imported, as well as explore
export opportunities – both these are favorable for ROLEXRIN. The company is also
benefitting from China+1 sourcing/shift from China policies of its customers.
Strong order book + large EV end-use orders; EVs to contribute 8%/11% of sales in
FY22/23E from nil in FY21: Due to the trends highlighted above, ROLEXRIN has strong
order book providing visibility of FY23E sales of Rs 12.5bn vs. our estimate of Rs 12bn. A
large order secured from a global bearing company has end usage in one of the world’s
largest EV OEMs; the order is expected to contribute ~11% of ROLEXRIN’s sales in FY23E.
ROLEXRIN first received an order from the customer’s US plant; later, due to high quality
and efficiency in delivery, got an order from the European plant as well.
Superior RoIC business, cash flow generating model due to critical products: While
ROLEXRIN has better scale, even smaller competitors with sales of ~Rs 2bn have a pre-tax Relative price chart
ROCE of 15%+. Over FY16-FY21, the company’s operating cashflow/EBITDA was 86%. ROLEXRIN IN Nifty Index

With expected forging capacity utilization of 50% in FY22 (vs peak potential of 75-80%), 1,225

capex will remain low over FY22E-FY24E, mainly towards machining capacities and 1,125

maintenance. With ~90% of products sold as machined products, ROLEXRIN’s realizations 1,025

are higher than other forging companies. Despite the COVID-led sales impact in 925
FY20/FY21, average pre-tax ROCE was 20% over FY17-FY21; we expect the same to 825
increase to 29%/31% over FY22/FY23E with improving utilization.
Aug-21

Source: Bloomberg
Financial Summary Analysts
EV/ Core EBITDA
YE Mar Recurring P/E P/B ROE
Sales EBITDA EPS (Rs) EBITDA ROIC Margin Ashutosh Tiwari
Rs mn PAT (x) (x) (%)
(x) (%) (%)
ashutosh@[Link]
FY21A 6,163 1,089 883 37.0 27.8 6.9 27.9 28.4 13.7 17.7
+91-079 6190 9517
FY22E 10,005 2,248 1,283 47.1 21.8 5.2 12.9 28.6 29.6 22.5
Aashin Modi
FY23E 11,991 2,711 1,817 66.7 15.4 3.9 10.3 28.9 33.3 22.6 [Link]@[Link]
FY24E 13,932 3,165 2,214 81.3 12.6 3.0 8.3 26.7 35.9 22.7 +91-9726744353
Source: Company, Equirus Securities

Refer to important disclosures at the end of this report September 29, 2021| 1
Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Sales Mix and Key Financials:

Exhibit 1: Geography-wise Revenue Split Exhibit 2: Product-wise Revenue Split

Domestic Exports Bearing Rings Auto Component

120% 100%
90%
100% 36%
80% 44% 43% 41% 41%
49%
70%
80%
60% 58% 59% 56% 58% 60%
64%
60% 50%
40%
40% 64%
30% 56% 57% 59% 59%
51%
42% 44% 42% 20%
20% 36% 40% 41%
10%
0% 0%
FY17 FY18 FY19 FY20 FY21 Q1FY22 FY17 FY18 FY19 FY20 FY21 Q1FY22

Source: Equirus, Company Data Source: Equirus, Company Data

Exhibit 3: Sales/EBITDA/EBITDA Margin Exhibit 4: EBITDA to Cashflow conversion

Sales EBITDA EBITDA Margin EBITDA CFO CFO/EBITDA

10,000 25.0% 2,500 1.6

9,000 1.4
8,000 20.0% 2,000
1.2
7,000
6,000 15.0% 1,500 1.0
5,000 0.8
4,000 10.0% 1,000 0.6
3,000
0.4
2,000 5.0% 500
1,000 0.2
0 0.0% 0 0.0
FY16 FY17 FY18 FY19 FY20 FY21 FY16 FY17 FY18 FY19 FY20 FY21

Source: Equirus, Company Data Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Investment Rationale
Bearing rings – favourable industry dynamics
Rising outsourcing trend as bearing cos focus on technology with EV transition
With a shift towards EVs in automotive, bearing designs are set to undergo changes due to high RPM
EV bearings require more technology of electric motors, along with a higher pick up. EV bearings entail more R&D and technology spends
spends – bearing companies to focus vis-à-vis IC bearings as heat generation is higher in EV bearings; moreover, since some bearings need
on same and outsource more to have more insulation, ceramic bearings are also used in EVs. Due to this, bearing companies are
focussing more on R&D and looking at increased outsourcing. The number of bearings in EVs will be
significantly lower than IC cars; however, the content per bearing will be higher due to increased
complexity and performance requirement. With a reduction in volumes, cost of production in high-cost
locations such as USA and Europe will also increase due to operating deleverage – another reason
driving outsourcing. ROLEXRIN is witnessing this trend in its new order bookings.

Companies looking at China +1 sourcing; ROLEXRIN wins large order

Post COVID, global companies are looking at the China + 1 sourcing strategy to reduce dependence.
ROLEXRIN secures large order from a With strong engineering capabilities and labour cost advantage, Indian companies are on a better
large bearing company as sourcing footing to capitalize on the same. A large order – of almost Rs 1.5bn/year peak revenue – that
shifted from China to India due to ROLEXRIN secured for an end application in EV is a sourcing shift from China to India by a very large
quality issues global bearings company; this shift did not stem due to COVID but due to some quality issues in China
sourced rings.

Large opportunity size; miniscule share of ROLEXRIN in global bearing rings market
The global bearings market is estimated at US$ 50bn; in the Indian market, bearing rings constitute
around 18% of bearing value. If we assume bearing rings to be 10-12% of the global bearings market
(considering higher employee and conversion costs), the global bearings ring market would be around
US$ 5bn-6bn. Of this, ~50% is estimated to be forged bearing rings that ROLEXRIN caters to as it
doesn’t make rings for small bearings used in applications such as fans, appliances and small motors
etc. In FY19, when ROLEXRIN generated its highest sales, its bearing ring sales were ~US$ 73mn.
Huge global opportunity as
ROLEXRIN’s market share in the global
bearing rings market is ~ 2.5-3% Exhibit 5: Approximate global forged bearing rings market
3,000
2,500
2,500

2,000
$ Mn

1,500

1,000

500
73
0
Global Bearing Ring Industry Rolex Bearing Ring Sales

Source: Equirus, Company Data

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 Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Engineering capabilities, long-standing relationships put ROLEXRIN in a sweet spot

ROLEXRIN has well-entrenched relationships with almost all leading global bearing manufacturers
like Timken, Schaeffler, SKF and NBC etc. Its consistent quality supplies to one plant typically open up
opportunities in other plants of the same company:

• ROLEXRIN started with supplies to Timken's France plant, and now caters to its seven plants
in five countries.

• It won an order from a large bearings company from its US plant for end use for a premium
Starts with one plant and adds more
EV OEM; later, based on its performance, ROLEXRIN received orders from the company’s
plants based on consistent quality
European plant as well.

• ROLEXRIN recently won a small order from another bearings company from two of its
European plants as the bearings company decided to outsource more to cut costs. More
orders from other plants are expected to flow through going ahead.

Bearing rings are a critical component for the overall performance of bearings and consequently end-
use applications; hence, manufacturers of high-precision bearing rings need to adhere to stringent
quality standards and tolerance levels. Bearing manufacturers tend to restrict the churn in suppliers and
prefer to work with approved vendors; this is reflected in customer stickiness in bearing rings
manufacturing. About 8 out of ROLEXRIN’s top-10 customers have been associated with the company
for more than 10 years.

Indian market to grow faster than underlying bearing market due to localization
Currently, ~40% of domestic bearing requirements are catered to through imports as it is economically
Industry interaction indicates one of the unviable for bearing manufacturers set up manufacturing facility for SKUs where market size is small in
large bearing company is shifting India, which typically happens in case of industrial bearings. With improved offtake, bearings will get
machinery form Europe to India for increasingly localised, aiding bearing component suppliers in the mid-to-long-term. Demand for
localization as well as export domestic bearing components (rollers, rings) is expected to grow at a faster rate (10-12% CAGR) than
opportunity in Industrial bearings the underlying bearings market owing to higher localization and better realizations. Our industry
interactions indicate that one of the large bearing company is shifting machinery from their European
plants to India for production of industrial bearings for import substitution as well as export
opportunities

Benefitting from localization of Korean OEMs

While companies such as Schaeffler, NEI and Timken are ROLEXRIN’s large customers in India
Added a Korean bearings company as
historically, it was not supplying to any major Korean bearing company till FY20. However, last year
customer last year; to benefit from
the company added a leading Korea-based bearings company as customer and is supplying wheel
Hyundai & Kia volume ramp up in India
hub bearings (earlier sourced by customer from Korea and China). Korean OEMs are looking to
localize sourcing from India with increasing volumes.

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Auto components – High entry barriers, long-duration contracts

High entry barriers
In the auto component segment, ROLEXRIN’s key customers are Allison Transmission, GM, and
Difficult to get in and get out; longevity Getrag. Allison Transmission is the world’s largest designer, developer, manufacturer and distributor
of contracts high at 5-7 years of medium and heavy-duty fully automatic transmissions and hybrid propulsion systems. Getrag is now
a part of Magna – a leading player in the global passenger and CV transmission systems. As
transmission parts are critical components, it is difficult to get customers on board. Even after
convincing customers for trials/testing, it takes almost 15-18 months for validation testing. Therefore,
entry barriers are high; besides, exit is also difficult as customers invest money and time on suppliers.
For example, it took almost 7-8 years for ROLEXRIN to convince one of the largest customers in this
segment for trials. Due to this long process, longevity of contracts is also high – in the range of 5-7
years. For instance, with one customer, the company has a contract till 2030.

High precision parts ensure better value addition, margins

ROLEXRIN is mainly into transmission and wheel parts, which require more precision and higher
~95% of ROLEXRIN Sales in auto machining. Almost 95% of auto component parts supplied by the company are machined. High-value
component parts are machined, addition is also reflected in higher scrap generation due to precision machining vis-à-vis peers. Due to
leading to better margins higher value addition, ROLEXRIN generates better margins in the auto component segment compared
to bearing rings.

Exhibit 6: Key Automotive Customers

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Significant EV opportunity
Supplies for engine components negligible; key end usage in transmission/wheel in PVs
In the auto component segment, ROLEXRIN does not supply for engine components; even in bearing
Presence more in complex bearings rings, supplies for engine bearings are extremely low. The company supplies some parts of a silencer
like wheel hub to a global customer; however, all put together, engine dependent parts form only ~2% of sales. Major
bearing rings supplied for automotive application find usage in wheel hub bearings, and transmission
in case of cars or CVs/tractors. ROLEXRIN is mainly present in complex bearings such as wheel-hub
bearings which also incorporate sensors.

Large bearing rings order for end usage in EVs to drive growth over FY22/23
ROLEXRIN received a large order from a leading global bearings company for end usage in a large
In terms of end use, EVs will contribute EV manufacturer. Initially, the order was received from the company’s US plant; however, based on
8%/11% of sales in FY22/23E vs nil in quality and delivery, ROLEXRIN received orders from the customer’s European plant as well. EV
FY20 bearings are more complex as, due to a faster pick up, heat generation is higher. ROLEXRIN’s
supplied parts had much better properties compared to end customer requirement, aiding incremental
orders. Due to this large order, the share of revenues with end usage in EVs will increase from nil last
year to ~11% of sales in FY23E.

Exhibit 7: FY22E End User Mix Exhibit 8: FY23E End User Mix
Industrial CV/Tractor/OTR PV Engine Industrial CV/Tractor/OTR PV Engine
PV Transmission PV Wheel EV PV Transmission PV Wheel EV
Scrap Scrap

6%
6% 18%
8% 19% 11%

19% 18%

29%
31%
14% 17%

2% 2%
Source: Equirus, Company Data Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Strong Order Book offers growth visibility for next 3 years

Annual sales visibility of Rs 12.5bn-13bn based on orders in hand
ROLEXRIN reported sales of Rs 2.27bn during 1QFY22, equivalent to annualized sales of Rs 9.1bn
despite the impact of COVID 2.0. The company has in hand the following major orders to drive growth
on this revenue base over FY22-24E:

• A Rs 1.5bn order from a leading global bearing company for end use in EVs. This order
was operating at annualized sales of ~Rs 500mn in 1QFY22; therefore, another Rs 1bn
incremental sales are likely to be added. It should reach peak sales in 2HFY23.

• A ~Rs 1bn order from a global PV transmission player for end use in hybrid cars. This
New orders worth Rs 4bn+ won to order will gradually start from 4QFY22 and will reach peak sales in FY24E.
drive growth till FY24E • A ~Rs 600mn order from a transmission player for end use in vehicles of a leading
European OEM.

• A ~Rs 250mn order from a leading bearings company for their European plant

• A Rs 0.75-1bn order from a leading bearings company for auto application from its US
plant. Deliveries for this order already started last year but will reach peak next year

• An order from a Korean bearings company for Indian requirement of Korean OEMS;
deliveries started last year but peak sales will happen by 4QFY22.

Existing orders seeing good ramp up due to exposure to industrial, CV/OTR vehicles
Two of ROLEXRIN’s largest customers have high exposure to bearings used in industrial application
Benefitting from a global pick up in and transmission in CVs/off-road vehicles. Both these segments are witnessing good traction in US and
CV/industrial segments Europe post pandemic, pushing up the sales momentum for ROLEXRIN in its existing business.
Besides, even on the domestic front, bearing companies such as Schaeffler/NEI/Timken are witnessing
good growth due to a demand pick-up and a drop in imports from China.

Exhibit 9: Sales (FY17-FY25E in Rs mn)

18,000

16,000

14,000

12,000

10,000
Rs. Mn

8,000

6,000

4,000

2,000

0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Source: Equirus, Company Data

Cashflows to stay strong with minimal capex requirement

Operating cashflow-to-EBITDA at 86% over FY16-FY21
Due to the critical nature of products to a marquee customers as well as high machined product Sales
Bearing rings as a business have a (~90%), ROLEXRIN’s financial matrix is solid – reflected in its high cashflow generation, ROCEs and
better financial matrix vs. other forging EBITDA margins. Even smaller companies in these product lines have decent ROCEs, implying that as
cos a business, bearing rings have a better financial matrix vis-à-vis other forging companies. Over the last
6 years, company’s cumulative Operating Cashflow/EBITDA stood at 86%, drop in FY21 is due to
significantly higher Sales in 4QFY21 vs 4QFY20, so working capital requirements increased in
4QFY21 vs drop in 4QFY20 due COVID impact and lockdown.

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Exhibit 10: EBITDA/CFO: Consistently healthy matrix (Rs mn)

EBITDA CFO CFO/EBITDA

2,500 1.6

1.4
2,000
1.2

1,500 1.0

0.8
1,000 0.6

0.4
500
0.2

0 0.0
FY16 FY17 FY18 FY19 FY20 FY21

Source: Equirus, Company Data

Exhibit 11: Pre Tax ROCE: Consistently Superior vs Peers

Rolex Rings Ramkrishna Forging MM Forging

Bharat Forge Agrasen Tech Ravi Technoforge
30%

25%

20%

15%

10%

5%

0%
FY16 FY17 FY18 FY19 FY20 FY21

Source: Equirus, Company Data

~90% machined product Sales leading to better realization vs peers

In both auto components & bearing ring segments, ROLEXRIN has high sales of machined products,
Consistently better realizations vs other ~90%. Due to this its realizations have been consistently better than peers. Its also one of the reasons
forging companies behind strong margins of company.

Exhibit 12: Rolex Rings Realizations (Rs/ton) vs peers

Rolex Rings Bharat Forge Ramkrishna Forging

3,00,000

2,50,000

2,00,000

1,50,000

1,00,000

50,000

0
FY16 FY17 FY18 FY19 FY20 FY21

Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Exhibit 13: Sales/EBITDA (Rs mn) trend: Growth driven by new orders

Sales EBITDA EBITDA Margin

18,000 25.0%
16,000
14,000 20.0%

12,000
15.0%
10,000
8,000
10.0%
6,000
4,000 5.0%
2,000
0 0.0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Source: Equirus, Company Data

Exhibit 14: - Rolex Rings ROCE (Pre Tax) trend: to improve further with increasing utilization (FY25
drop due to increase in cash)
35%

30%

25%

20%

15%

10%

5%

0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Source: Equirus, Company Data

Exhibit 15: Core ROIC (Ex-cash)

35%

30%

25%

20%

15%

10%

5%

0%
FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Source: Equirus, Company Data

September 29, 2021| 9

Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Investing in solar power to reduce power costs

Power & fuel cost is the second largest cost component for ROLEXRIN at 8.4% (of sales) after raw
To reduce power & fuel costs (8.4% of
materials; therefore, the company is looking at renewable power capacity. ROLEXRIN currently has
sales) ROLEXRIN in process of 8.75MW/1.58MW of wind/solar power capacity. During FY21, power generated by windmills and
expanding its solar power capacity to existing solar power facilities was ~10.1mn vis-à-vis overall power units consumed of ~57.1mn units.
16MW The company is in the process of expanding its solar power plant capacity to 16MW and has already
placed an order for 7.35MW; this should help reduce power costs and improve carbon footprint.

Exhibit 16: Power & Fuel cost as % of Sales: To decline going ahead due to increased inhouse Solar
power production

Power Cost as % of sales

10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Source: Equirus, Company Data

Low capacity utilization to keep capex requirements in check, leading to high free cash flows
At Rs 9bn sales in FY19, forging capacity utilization was ~50%. At peak levels, the company can
Capex requirement over next 3 years to
achieve 75-80% utilization; therefore, it will not need any fresh capex for forging machines over the
be for machining capacity; hence FCF next three years. Lead time for forging capex is higher as it takes almost 12-15 months from order
set to be strong placement till commissioning. Lead times are much lower for machining capacity and hence the
company places machine orders when it receives confirmed orders. Over the next three years, by
spending capex of ~Rs 200mn per year on machining, ROLEXRIN can reach sales of Rs 15bn-16bn
from the existing forging plant. Free cash flows are therefore expected to be strong over the next three
years with core ROIC improvement.

Exhibit 17: Operating cash flows vs Capex (Rs mn)

CFO Capex

2,500

2,000

1,500

1,000

500

0
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Comes out strongly from historical debt issues

Post fund infusion by a PE firm in 2007 (~Rs 1.5bn), ROLEXRIN planned a large capex of ~Rs 4bn;
Strong FCF generation starting FY15 however, plant commissioning in 2009-10 coincided with the Global Financial Crisis, leading to
facilitated debt repayment. ROLEXRIN several order cancellations and deferments for the company. Till 2007, exports were more than 60%
to become net cash from FY24 of sales and more so from Europe – the most impacted region post GFC. Due to the sales decline and
beginning profitability issues, the company was unable to service debt raised for expansion and invoked CDR in
Jan’13. The restructured term debt amounted to Rs 4,870mn, of which Rs 1,359mn was to be repaid
by 31 Mar’20 and the balance Rs 3,511mn by 31 Mar’22. Further, consortium lenders assessed fund-
based WC limit to Rs 1,491mn/Rs 1,806mn and non-fund based WC limit to Rs 822mn/
Rs 939mn for FY13/FY14. However, driven by its strong FCF generation starting FY15, ROLEXRIN
repaid a large part of long-term debt.

Exhibit 18: Net Debt to Equity (Rs mn): Significant reduction, will be net cash company by FY24

Net Debt Net Debt/Equity

6,000 6
5,000 5
4,000 4
3,000 3
2,000 2
1,000 1
0 0
-1,000 -1
-2,000 -2
-3,000 -3
-4,000 -4
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Forecast: Key assumptions & sensitivity

Expect 17%/27% Sales/PAT CAGR over FY22-FY25E
• New order worth Rs 4bn+ received over last 1-1.5 years provide Revenue visibility of Rs
12.5bn Sales in FY23 vs our assumption of Rs 12bn

• Existing business will also see sales revival driven by auto and industrial recovery as well as
Revenue visibility driven by new orders. increased localization of industrial bearing manufacturing in India
EBITDA margins inline with historical
• EBITDA margins have fluctuated in a narrow range over last 6 years, our EBITDA margin
assumptions going ahead are lower than what company delivered in 1QFY22 and inline with
EBITDA margin over FY17-19 despite operating leverage benefits

Exhibit 19: Key Assumptions (Rs mn)

FY19 FY20 FY21 FY22 FY23 FY24 FY25
Bearing Ring Sales 5,345 3,498 3,302 5,453 6,490 7,473 8,949
Auto Component Sales 2,944 2,661 2,330 3,912 4,743 5,586 6,085
Scrap & Others 754 501 531 640 758 873 994
Total Sales 9,043 6,660 6,163 10,005 11,991 13,932 16,028
EBITDA 2,011 1,214 1,089 2,248 2,711 3,165 3,647
EBITDA Margin 22.2% 18.2% 17.7% 22.5% 22.6% 22.7% 22.8%
Source: Equirus, Company Data

Exhibit 20: Sensitivity: 100 bps change in EBITDA Margin changes PAT by 5%
FY23 Sensitivity Analysis
EBITDA Margin PAT (Rs mn) % change in PAT
20.6% 1,623 -10%
21.6% 1,712 -5%
22.6% 1,802 0%
23.6% 1,892 5%
24.6% 1,981 10%
Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Valuation – Long Term growth story, good visibility driven by

Order Book
Why we like the company from 3-year perspective:
• Strong cash flows: It has a strong free cash flow generation track record and has come out
of CDR issue on its own without any meaningful cash infusion in form of equity. Even going
ahead as capex requirements are limited over next 3 years, Free cash flows will remain strong

• Opportunity in both domestic & exports: With its relationship will most of the top global
bearing companies, its well placed to capitalize on outsourcing trend by Europe and North
American plants of bearing companies. In India, bearing companies like Schaeffler, SKF and
Timken are now looking to localize production of more industrial bearings as well as exports
from India due to cost advantage

• China + 1/Shift from China in sourcing: One of the large order wins of the company in last
one year was related to shift in sourcing by the customer from China to India due to quality
issues. We believe that companies like Rolex with their strong track record in engineering as
well as quality delivery are stand to benefit from this

• Strong and consistent margin profile: Over FY16-20, ROLEXRIN EBITDA margin averaged
at 20%. Even during FY20, when Sales dropped 26% yoy, EBITDA margin of company was
18.2% and hence core business has strong inherent margins, not only dependent on volumes

• EVs are growth opportunity and not risk in ROLEXRIN business: Due to large new order win,
EVs will contribute ~8%/11% of Sales in terms of end usage in FY22/23E. In the existing
business, engine parts are hardly 2% of Sales and hence we don’t expect much impact.

• Superior ROCE vs peers: Over the last 5-6 years, ROLEXRIN’s ROCE has been consistently
ahead of peers in forging industry. Another important factor is that even smaller competitors
in this segment with Sales of ~Rs 2bn also has decent ROCE suggesting inherent strength of
this business

• Sales/EBITDA/PAT to grow at 17%/17%/27% over FY22-25E: Driven by new orders in hand

as well as pick up in industrial/autos we expect company to deliver 17% Sales CAGR over
FY22-25E. While company delivered 23.6% EBITDA margin in 1QFY22 despite COVID
impact, we are conservatively EBITDA margin of 22.6-22.8% over FY22-25E, leaving some
room for upside. PAT will benefit from increasing utilization, and we expect 27% CAGR over
FY22-25E.

• Initiate coverage with Sep’22 PT of Rs 1,469: Considering its superior ROCE vs peers and
strong cash flows, we believe that company will trade at higher multiples vs other forging
peers of similar size and value the company at 20x Sep’23 EPS deriving Sep’22 PT of Rs
1,469. Due to good growth visibility over next 3 years, we also derive Mar’24 PT of Rs 1,923
at 20x Mar’25 EPS.

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Exhibit 21: Historical Performance & Long term perspective

CAGR FY16-19 FY19-22E FY22E-25E
Sales CAGR 14.6% 3.4% 16.8%
EBITDA CAGR 22.2% 3.7% 17.3%
PBT CAGR 63.7% 9.8% 23.1%
Cumulative Performance FY17-19 FY20-22E FY23E-25E
EBITDA Margin 22.0% 19.5% 22.7%
ROCE 23.1% 19.4% 30.9%
CFO/EBITDA 82% 77% 58%
(CFO Excl. Tax)/EBITDA 89% 96% 82%
FCF 3,385 2,692 4,201
Source: Equirus, Company Data

Exhibit 22: Key Financials (Rs mn): FY19-25E

FY19 FY20 FY21 FY22 FY23 FY24 FY25
Total Sales 9,043 6,660 6,163 10,005 11,991 13,932 16,028
EBITDA 2,011 1,214 1,089 2,248 2,711 3,165 3,647
EBITDA Margin 22.2% 18.2% 17.7% 22.5% 22.6% 22.7% 22.8%
PBT 1,406 721 752 1,865 2,409 2,939 3,500
PAT 590 529 870 1,269 1,802 2,198 2,618
EPS 24.6 22.0 36.5 46.6 66.2 80.7 96.1
Net Debt 3,911 2,998 2,926 1,537 479 -1,163 -2,898
Equity 2,153 2,681 3,567 5,396 7,198 9,396 12,014
Source: Equirus, Company Data

Exhibit 23: Relative Valuation

Mkt Cap PE EV/EBITDA PB ROE (%) ROIC (%)
(Rs mn) FY21 FY22E FY23E FY21 FY22E FY23E FY21 FY22E FY23E FY21 FY22E FY23E FY21 FY22E FY23E
Rolex Rings 27,875 27.8 21.8 15.4 27.8 12.8 10.3 6.9 5.2 3.9 28% 29% 29% 14% 30% 34%
Bharat Forge Ltd 3,46,439 -274.1 38.3 26.0 43.3 20.0 14.9 6.6 5.7 4.8 -2% 15% 19% 2% 11% 15%
Mahindra CIE
87,537 82.3 13.3 11.8 19.8 7.2 6.5 1.7 1.5 1.3 2% 11% 11% 2% 10% 10%
Automotive Ltd
Ramkrishna Forgings
33,981 164.4 20.8 15.8 20.5 10.3 8.8 4.0 3.3 2.8 2% 16% 18% 4% 9% 10%
Ltd
MM Forgings Ltd 19,433 41.6 23.0 14.8 18.0 11.1 8.4 4.0 3.5 3.0 10% 15% 20% 5% 16% 19%
Craftsman
44,832 46.0 27.8 16.7 11.5 9.1 6.9 4.6 4.0 3.3 10% 14% 20% 11% 15% 20%
Automation Ltd
SKF India Ltd 1,52,714 51.3 41.8 34.8 35.2 29.2 24.4 9.8 8.3 6.9 19% 20% 20% 23% 24% 23%
Schaeffler India Ltd 2,32,389 79.9 36.8 32.4 41.1 21.5 18.8 6.6 5.8 5.1 8% 16% 16% 10% 22% 23%
Timken India Ltd 1,28,244 89.6 55.5 40.0 50.0 34.0 25.2 10.2 8.3 7.4 11% 15% 18% 11% 16% 22%
Source: Equirus, Bloomberg Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Risk & Concerns

• ROLEXRIN is heavily dependent on the performance of the automotive sector in India,
Europe, North America, Latin America and some part of Asia. Any adverse changes in
conditions affecting these markets can hurt the business, results of operations, cash flows and
financial condition.

• During FY19/FY20/FY21, ROLEXRIN’s top-10 customers contributed 65.6%/76.9%/72.6%

of sales. A few customers belong to the same corporate group, but decision making for each
of these customers is largely independent.

• Geographical concentration of manufacturing facilities may restrict operations and adversely

affect business.

• ROLEXRIN relies on third parties to transport products to customers, and source RM for
manufacturing facilities. Any disruption in transportation arrangements or increases in
transportation costs may impact business.

Corporate Governance
• As of Mar21, Rolex’s board comprised of 8 directors of which four were Independent
Directors, one Nominee Director nominated by PE investor (Rivendell PE LLC) and 3 were
from promoter family including Managing Director. One of the Independent Director is
Women

• S R B C & Company LLP is the statutory auditor, and the auditor report does not contain any
adverse remark.

• In terms of the SEBI Listing Regulations, and the provisions of the Companies Act, 2013,
Company has constituted the following Board-level committees:
i. Audit Committee: Consist of six directors out of which four are independent
directors
ii. Nomination and Remuneration Committee: Consist of three directors who are all
independent
iii. Stakeholders’ Relationship Committee: Consist of three directors out of one is
independent
iv. Corporate Social Responsibility Committee: Consist of four directors none of whom
are independent
• Company’s external corporate social responsibility programmes include supporting programs
geared towards promoting healthcare, education, environment sustainability and animal
welfare. It spent ₹2.07 million, ₹7.16 million, ₹8.59 million and ₹16.8 million over FY18,
FY19, FY20 and FY21 respectively, on corporate social responsibility initiatives.

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Industry Overview
ROLEXRING derives ~55% of its sales from bearing rings; therefore, opportunity size in global bearing
rings is very important for company.

Exhibit 24: Global Bearing Industry valued at $50 Bn

China Americas Europe Japan India Others

4% 12%
30%

10%

22%
22%

Source: Equirus, Company Data

Global Bearing Manufacturers’ outsourcing of rings to increase towards low-cost countries

Globally, bearing manufacturers are focussing more on design of bearings and therefore are
Indian players to benefit from increase outsourcing manufacturing of parts used in bearings. Global bearing rings market is estimated to be
out sourcing as well as China+1 around US$ 5-6bn. Indian bearing ring manufacturers have a cost advantage against companies
strategy having manufacturing facilities in US/Europe and are also expected to benefit from de-risking in
sourcing from China. With onset of EVs, outsourcing is going to be further pronounced as EVs demand
advanced bearings and hence more precision technology

Localization of bearings manufacturing to help domestic component suppliers

As per ICRA report, Currently, ~40% of domestic bearing requirements are catered to through imports
as volumes in India for only some SKUs are economically viable for bearing manufacturers to set up
dedicated lines. With improved offtake, bearings will get increasingly localised, aiding bearing
component suppliers in the mid-to-long-term. Hence, demand for domestic bearing components
(rollers, rings) is expected to grow at a faster rate (~10-12% CAGR) than the underlying bearings
industry. Moreover, increasing complexity of bearings will further buoy realizations for bearing
component suppliers.

Exhibit 25: Domestic Bearings Market is expected to show healthy growth going forward
180 CAGR: 9-11%
FY2021-FY2025E 153
160
CAGR: +10.1% 132
140
FY2013-FY2019
120 105
100
Rs. Bn

82
80
60
40
20
0
2017 2021E 2023E 2025E

Source: Equirus, Company data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Exhibit 26: Domestic bearing industry Exhibit 27: Bearing demand split in Domestic Market

Domestic Production Imports Industrial Automotive

40%
48%
52%
60%

Source: Equirus, Company Data Source: Equirus, Company Data

Exhibit 28: ~80% of domestic market share with top 5 players

SKF Schaeffler NBC Timken NRB Others

19%
23%

6%

13%
21%

16%

Source: Equirus, Company Data

Bearing rings – critical & largest RM cost component for bearing companies
Bearing rings form ~18% of domestic bearings market; forged rings used in complex
applications
Bearing rings form one of the most critical and the largest RM cost components for the bearings sector;
at ~Rs 22bn, the industry contributes ~18.3% of the domestic bearings market. Rings can be
manufactured using tubes, cold-drawing of steel bars or by forging process. Amongst these three
processes, forged rings are mainly used in critical applications wherein the load/stress is higher. The
forged bearing rings market is estimated at ~Rs 11bn of the overall bearing rings market, while the
balance is split between rings manufactured using tubes and cold-drawing of steel bars. Given that
bearings find application in computer hardware to the aerospace industry, and can vary from few milli
meters in diameter to tens of meters, the complexity of bearing rings varies with its proposed
applications, weight and size. While entry barriers are lower for smaller bearing rings with high
tolerances, technological knowhow and manufacturing capabilities become a differentiating factor as
the complexity/size of bearings increases.

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Exhibit 29: Domestic market for forged Bearing Rings is Rs. 11 Bn

Source: Equirus, Company Data

High entry barriers due to use in critical applications

The manufacturing process and competitive intensity is also determined by raw materials being used,
machining requirements post forging and surface treatments required to be given to bearing rings.
Bearing rings are a critical component for overall performance of bearings and consequently end-use
applications; hence, manufacturers of high-precision bearing rings need to adhere to stringent quality
standards and tolerance levels. Bearing manufacturers tend to restrict the churn in suppliers and prefer
to work with approved vendors; this is reflected in customer stickiness in bearing rings manufacturing.

Exhibit 30: Key Domestic Bearing Component Suppliers

Product Name Suppliers
Bearing Ring/Races Rolex Rings Limited (Rolex), Ravi Technoforge India Private Limited (RTPL), Agrasen Engineering, Kirti Forgings
Rollers Vishal Bearings Limited, NHB Ball and Roller Limited, Kansara Modler Limited
Bearing Seals Seeco Industries Limited, Ashutosh Rubber Private Limited
Bearing Cages Harsha Engineers Limited, Bharadia Engineering Industries
Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Major competitors manufacturing bearing rings in the domestic market include:

Ravi Technoforge: Company produces Auto Water Pump, Automobile Water Pump, Forged Ring and
Machined Ring. Plant located in Rajkot. Bearing rings is largest segment. Customers include Schaeffler,
SKF, INA. Nachi etc. Exports contributed 29% of Sales in FY21

Exhibit 31: Ravi Technoforge Financials

Rs mn FY16 FY17 FY18 FY19 FY20
Sales 1,438 1,501 1,911 2,270 1,569
EBITDA 258 244 290 367 223
EBITDA Margin 18% 16% 15% 16% 14%
EBIT 195 178 220 297 148
PBT 47 15 89 165 7
PAT 19 16 65 105 32

Equity 376 362 426 526 553

Debt 1,113 979 871 875 833
Total CE 1,489 1,341 1,297 1,402 1,386
RoE 4% 16% 22% 6%
RoCE (Pre Tax) 13.1% 12.6% 16.7% 22.0% 10.6%
Source: Equirus, Company Data

Agrasen Engineering: Mainly in bearing rings business – forged and machined parts. Plants located in
Jaipur. Have hot speed hot formers from Hatebur. Have capability to produce bearing rings from 30-
200mm diameter (Rolex can produce till 900mn diameter). During FY20, exports contributed 17% of
Sales

Exhibit 32: Agrasen Engineering Financials

Rs mn FY16 FY17 FY18 FY19 FY20
Sales 868 957 1,239 1,415 1,667
EBITDA 110 163 126 279 270
EBITDA Margin 13% 17% 10% 20% 0
EBIT 81 133 97 227 208
PBT 78 131 96 219 195
PAT 52 86 83 171 138

Equity 503 588 671 842 980

Debt 63 59 59 162 235
Total CE 566 648 730 1,004 1,215
RoE 16% 13% 23% 15%
RoCE (Pre Tax) 22% 14% 26% 19%
Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Company Overview
Diversified product/geo mix with long-standing customer relationships
Key supplier to all major bearing Manufacturers
One of the key manufacturers of Bearing Rings in India focused on Hot Rolled and machined bearing
rings. Caters to most leading bearing companies in India. Major customers include Timken, Schaeffler,
SKF, NRB, NBC. Till date, Rolex Rings has offered a diverse range of hot forged and machined alloy
steel bearing rings ranging from 10 gm to 163 kg in weight and 25 mm to 900 mm in diameter. Its
bearing rings are suitable for wide range of end-user industries such as Automotive, railways, industrial
infrastructure, renewable energy, among others. The company has the capabilities to cater to bigger
rings requirements which have higher value and relatively lower competitive intensity

Export led Auto Components Business

The company is a Tier-I supplier to global auto OEMs across segments including 2W, PV, CV, OHV
and EVs. Product portfolio of the company includes wheel hubs, shafts and spindles and gears amongst
others. Majority of the auto component revenue comes from the export market which helps in product
and geographical diversification of the overall business.

Exhibit 33: Bearing Rings Revenue Split Exhibit 34: Auto Component Revenue Split

Domestic Exports Domestic Exports

100% 100%
90% 90%
80% 44% 45% 80%
47% 47% 50%
70% 70%
60% 60% 77%
95% 94% 94% 89%
50% 50%
40% 40%
30% 56% 55% 30%
53% 53% 50%
20% 20%
10% 10% 23%
5% 6% 6% 11%
0% 0%
FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21

Source: Equirus, Company Data Source: Equirus, Company Data

Exhibit 35: Geography wise Revenue Split Exhibit 36: Product wise Revenue Split

Domestic Exports Bearing Rings Auto Component

120% 100%
90%
100% 80% 36%
44% 43% 41% 41%
49%
70%
80%
60% 58% 59% 56% 58% 60%
64%
60% 50%
40%
40% 30% 64% 59% 59%
51% 56% 57%
20%
20% 40% 42% 41% 44% 42%
36% 10%
0% 0%
FY17 FY18 FY19 FY20 FY21 Q1FY22 FY17 FY18 FY19 FY20 FY21 Q1FY22

Source: Equirus, Company Data Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Exhibit 37: In FY20 Rolex Rings supplied products to leading domestic & international customers spread across 60 customers in 17 countries

Source: Equirus, Company Data

Manufacturing capacities offer scale & flexibility

Among top-5 forging companies in India
As per an ICRA report, ROLEXRIN has the fifth largest forging capacity in India with a total installed
capacity of ~145k TPA. The company is a key supplier to leading bearing manufacturing companies
and tier-1 suppliers to global auto companies and domestic auto OEMs. End-user segments for its
products include 2Ws, passenger vehicles, CVs, off-highway vehicles, EVs, industrial machinery, wind
turbines and railways. Till date, 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. It also has an unutilized land area of 32,071 square metres at Rajkot and
691,312 square metres of land in Taluka Gondal (Gujarat) for any future expansion plans.

Exhibit 38: Domestic Forging Companies Capacity

Installed Capacity
Company Name
(MTPA)
Bharat Forge Limited 4,06,150
Amtek Group 3,00,000
Mahindra CIE Automotive 1,70,000
Ramkrishna Forgings Limited 1,70,000
Rolex Rings Limited 1,44,750
MM Forgings Limited 1,00,000
Echjay Industries Private Ltd. 70,000
Happy Forge Limited 60,000
Sadhu Forging Limited 40,000
Super Autoforge Private Ltd. 30,000
Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Three manufacturing units with integrated forging, machining and heat treatment facilities
ROLEXRIN started manufacturing operations in 1988 with the first manufacturing plant set up in Rajkot.
Currently, it has three manufacturing units in Rajkot with 22 forging lines and a combined installed
capacity of ~145k TPA. Manufacturing infrastructure includes High-Speed Hot Formers from
Sakamura and Hatebur;, Vertical Forging Lines from Manyo, Mistubishi, SMS Meer, Enomoto, Eumoco
and Conventional Forging Lines integrated with induction heating furnaces.

A wide variety of forging machines gives flexibility to manufacture high-volume parts in a cost effective
manner. For instance, high-speed hot formers are best suited for high-volume precision components
while vertical forging lines for medium as well as lower volume production. This helps in addressing a
wide range of end-user industries and in servicing customers across a broader product horizon.

Exhibit 39: Manufacturing Plants – 3 plants located in Rajkot, Gujarat

Unit details Process undertaken
Unit I Forging; Heat treatment; Shot blasting
Forging; Heat treatment; Shot blasting; Cold rolling; Machining; Quality control and testing;
Unit II
Packing and dispatch
Tool and die making; Shot blasting; Machining; Quality control and testing; Finished good
Unit III
warehouse; Packing and dispatch
Source: Equirus, Company Data

Exhibit 40: Forging achievable capacity (Tons per annum)

Forging Line No of Lines 2017-18 2018-19 2019-20 2020-21
Conventional 6 11,250 11,250 11,250 11,250
Manyo 6 25,000 25,000 25,000 25,000
Mitshubishi 2 8,750 8,750 8,750 8,750

Sakamura 160 Hot

1 17,500 17,500 17,500 17,500
Former High Speed

Sakamura 120 Hot

1 12,500 12,500 12,500 12,500
Former High Speed

Hatebur- HM75 Hot

1 18,750 18,750 18,750 18,750
Former High Speed

SMS- MEER 1 9,000 9,000 9,000 9,000

Hatebur- HM35 Hot

1 12,500 12,500 12,500 12,500
Former High Speed

Sakamura HFW-
1 18,750 18,750 18,750
1000
Enomoto Press 1 1,563 6,250
Eumoco 1 2,250
Total 22 1,15,250 1,34,000 1,40,250 1,44,750
Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Focus on improving capabilities in Machining

A large part of existing machining lines consists of spindles from DMG, FUJI, ACE, TSUGAMI, Hyundai,
Mazak, Muratec and Domestic CNC Turning centres. Other machinery includes heat treatment
furnaces, cold rolling machines and other infrastructure. Currently, it has 528 spindles with a combined
installed capacity of 69mn parts per annum. The company intends to enhance its capabilities in
machining and post machining processes to increase the share of value-added and high-margin
components. It is in the process of expanding cold rolling facilities, machining capacities and heat
treatment facilities, including its existing order for cold rolling lines from Kyoei Seiko.

Strategically Located to serve marquee clientele

Situated in Rajkot, ROLEXRIN has access of various automotive clusters in North, West and South India.
Rajkot is ~250kms from Mundra and Pipavav ports and 700kms from the Mumbai port, reducing
freight cost and turnaround time, while facilitating exports for the company. ROLEXRIN leverages the
presence of smaller machining units in Rajkot for pre-machining and hiring trained manpower.

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Exhibit 41: Manufacturing Process

Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Exhibit 42: Key Awards, accreditations and recognition

Calendar Year Awards and Accreditations
2011 Excellence in Cost and Productivity – Timken
2011 Excellence in Technology – Timken
2014 GM Supplier Quality Excellence Award
Certificate of Supplier Quality for fulfilling the quality assurance compliance by Hyundai Motors
2014
India Ltd.
2016 Excellence in Technology Advancement by Timken powered by VRIDDHI
2018 Supplier Quality Excellence Award – General Motors
2018 Excellence in New Product Development – Timken
2019 Supplier Quality Excellence Award – General Motors
2021 Q1 Preferred Quality Status - Ford
Source: Equirus, Company Data

Exhibit 43: Major Events and Milestone

Calendar Year Details
1977 Commencement of business in the name of Rolex Industries
1978 Formation of partnership firm in the name of Rolex Industries
1988 Started manufacturing of Forging and Forged Products
1989 Obtained Importer-Exporter code for export of business
1991 Commissioning of Unit 1
2003 Purchase of Sakamura model HBP-160
2003 Conversion of partnership firm into Company
2007 Purchased 6 Manyo 600 tons Auto Forging Press
2007 Investment by Rivendell PE LLC
2007 Purchase of (a) Hatebur Hotmatic – HM75XL Hot Former, (b) Sakamura Model HBP – 120SS
2007 Availed registration of central excise for Unit 2
2010 Purchase of SMS MEER Ring Rolling line
2011 Purchase of Hatebur-Hotmatic@ HM 35 Machine
2014 Setting up of Unit 3
2017 Purchase of Sakamura Model: HFW-1000-4 Hot Former
2019 Crossed ₹9,000 million in revenue
Source: Equirus, Company Data

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Management Profile
Brief profiles of Board of Directors
Manesh Dayashankar Madeka is Chairman and Managing Director. He together with Rupesh
Dayashankar Madeka started the business under the partnership firm by the name of Rolex Industries
in 1978. He has over 40 years of work experience in marketing, production and finance.

Bhautik Dayashankar Madeka is Whole Time Director. He holds a bachelor’s degree in commerce
from Ranchi University, Ranchi. He has over 18 years of work experience in production, planning and
control. He joined the company on December 31, 2002 when it was still a partnership firm.

Mihir Rupeshkumar Madeka is Whole Time Director. He holds a bachelor’s degree in engineering from
Nagpur University. He has over 18 years of work experience in marketing functions and in the
development of new customers and products. He joined the company on December 31, 2002 when it
was still a partnership firm.

Vivek Sett is Nominee Director. He has been admitted as an associate of The Institute of Chartered
Accountants of India. He was previously associated with Ispat Industries as its director (commercial)
and Tata Realty & Infrastructure, Tata Teleservices Limited and Hughes Telecom (India) Limited as their
chief financial officer. He is currently a Partner at New Silk Route Advisors.

Pravinchandra Ratilal Dholakia is Independent Director. He is a fellow of the Institute of Chartered

Accountants of India. He has been qualified as a practicing chartered accountant since 1974. He is
currently a senior partner at P.R Dholakia & Co., Chartered Accountants.

Dipesh Dhirajlal Kundaliya is Independent Director. He holds a master’s degree in engineering

(mechanical) from Saurashtra University and a doctor of philosophy in engineering from Shri
Jagdishprasad Jhabarmal Tibrewala University, Jhunjhunu. He is a qualified Certified Energy Manager
and a Certified Energy Auditor of the National Productivity Council. He is a member of The Institution
of Engineers (India) and has been awarded use of the title Chartered Engineer (India) for the
mechanical engineering division. He is also a member of the Indian Society for Technical Education
and a fellow of the Institution of Valuers, India.

Jignasa Pravinchandra Mehta is Independent Director. She holds a bachelor’s degree in engineering
(mechanical), a master’s degree in engineering (machine design) and a doctorate of philosophy in
mechanical engineering from Sardar Patel University, Gujarat. She has completed a short-term training
program on MATLAB Fundamentals and Applications for Mechanical Engineers by V.V.P. Engineering
College Rajkot. She is a professor and the head of the department of mechanical engineering at V.V.P
Engineering College, Rajkot.

Ashit Ravishankar Vankani is Independent Director. He holds a diploma in electrical engineering and
mechanical engineering from the Government Polytechnic, Rajkot. He is currently associated with
National Wire Products in the capacity of a partner since 1975.

Brief profiles of Key Management Personnel

Bharat Jiten Madeka is the President - Operations & Human Resources of the company. He has a
diploma in engineering (mechanical) from N.M. Gopani Polytechnic Institute, Ranpur. He joined the
company in the year 2007 and has had over 13 years of experience in tool designing and forging
lines.

Hemal Paresh Madeka is the President – Supply chain & Quality Assurance of the company. He holds
a bachelor’s degree in engineering (mechanical) from Nagpur University. He joined the company while
it was still a partnership firm on December 31, 2002 and has over 18 years of experience with the
company. He is responsible for the supply chain and quality assurance function of the company.

Hiren Dilipbhai Doshi is the Chief Financial Officer of the company. He joined the company as Vice
President – Finance with effect from April 1, 2009 and was designated as the Chief Financial Officer
with effect from March 12, 2021. He is a certified chartered accountant of the Institute of Chartered
Accountants of India. He has been responsible for the finance function of the company. Prior to joining
the company, he worked with Atul Auto Limited for over 11 years.

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Jiten Dayanshankar Madeka is the Joint head of Plant & Maintenance of the company. He joined the
company while it was still a partnership firm in 1978. He has over 42 years of work experience with
the company in tool development and optimum utilisation for of operational equipment efficiency.

Pinakin Dayashankar Madeka is the Head of Forgings of the company. He joined the company while
it was still a partnership firm in 1989. He has over 31 years of work experience with the company. He
is responsible for the forging functions of the company.

Rupesh Dayashankar Madeka is the Joint head of Plant & Maintenance of the company. He together
with Manesh Dayashankar Madeka started the business under the partnership firm by the name of
Rolex Industries in 1978 and has over 42 years of work experience. He is responsible for the plant and
maintenance function of the company.

Hardik Dhimantbhai Gandhi is the company Secretary and Compliance Officer. He joined the
company as Company Secretary with effect from June 12, 2015 and was designated as a compliance
officer with effect from March 12, 2021. He is an associate member of the Institute of the Company
Secretaries of India. Prior to joining the company, he was associated with MJP Associates as a trainee.
He has over 5 years of experience in legal and secretarial compliance. He is responsible for the
secretarial and compliance functions of the company.

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Company Snapshot
How we differ from consensus
Particular (Rs Mn) Equirus Consensus % Diff Comment
FY22E 10,006 N.A. N.A.
Sales
FY23E 11,991 N.A. N.A.
FY22E 2,248 N.A. N.A.
EBITDA
FY23E 2,711 N.A. N.A.
FY22E 1,269 N.A. N.A.
PAT
FY23E 1,802 N.A. N.A.

Key Estimates
Key Assumptions (Rs mn) FY21 FY22E FY23E FY24E
Bearing Ring Sales 3,302 5,453 6,490 7,473
Auto Component Sales 2,330 3,912 4,743 5,586
Scrap & Others 531 640 758 873
Total Sales 6,163 10,005 11,991 13,932
EBITDA 1,089 2,248 2,711 3,165
EBITDA Margin 17.7% 22.5% 22.6% 22.7%

Company Description:
ROLEXRIN started its journey in 1977 when promoters started the business of forging from a small
shed in Rajkot; but from thereon, its vision made it a supplier of precision components to leading
global bearing companies, OEMs and transmission players. In 1994, the company won its first order
from a global bearing company (SKF, Brazil) and later in 1998-99, its first order from Timken, France.
Based on its consistent quality and timely delivery, it added more plants of Timken and today supplies
to 7 plants of Timken in 5 countries. From the beginning, management was focussed towards building
World class facility and hence almost all its forging machines are imported from Japanese and
European suppliers; even on the machining side, ~85% of machines are from global suppliers.

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 Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Quarterly performance
Y/E Mar (Rs mn) 1QFY21A 2QFY21A 3QFY21A 4QFY21A 1QFY22A 2QFY22A 3QFY22E 4QFY22E
Revenue 731 0 0 2,087 2,274 2,456 2,578 2,697
COGS 397 0 0 929 1,030 1,154 1,238 1,336
Employee Cost 112 0 0 147 143 155 155 178
Other Expenses 208 0 0 574 562 589 606 611

EBITDA 13 0 0 435 538 557 580 573

Depreciation 63 0 0 63 63 67 67 67
EBIT (49) 0 0 372 475 490 513 506
Interest Exp. (1) 0 0 41 67 55 49 44
Other Income 3 0 0 58 37 17 18 24
Profit before Tax (46) 0 0 390 445 452 482 486
Tax Expenses (16) 0 0 1 142 145 154 156
Profit After Tax (30) 0 0 389 303 308 328 330
Minority Interest 0 0 0 0 0 0 0 0
Profit/(Loss) from Associates 0 0 0 0 0 0 0 0
Recurring PAT (30) 0 0 389 303 308 328 330
Exceptional Items 0 0 0 0 0 0 0 0
Reported PAT (30) 0 0 389 303 308 328 330
Other comprehensive income. 0 0 0 0 0 0 0 0
PAT after comp. income. (30) 0 0 389 303 308 328 330
FDEPS (1.2) 0.0 0.0 16.2 11.1 11.3 12.0 12.1
Cost items as % of sales
RM expenses 54.4 0.0 0.0 44.5 45.3 47.0 48.0 49.5
Employee expenses 15.4 0.0 0.0 7.1 6.3 6.3 6.0 6.6
Other expenses 28.5 0.0 0.0 27.5 24.7 24.0 23.5 22.6
Margin (%)
Gross Margin 45.6 0.0 0.0 55.5 54.7 53.0 52.0 50.5
EBITDA Margin 1.8 0.0 0.0 20.9 23.6 22.7 22.5 21.2
PAT Margin (4.1) 0.0 0.0 18.6 13.3 12.5 12.7 12.2
YoY Growth (%)
Sales 0.0 0.0 0.0 0.0 210.9 0.0 0.0 29.3
EBITDA 0.0 0.0 0.0 0.0 3,900.3 0.0 0.0 31.5
EBIT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35.8
PAT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (15.1)

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Key Financials (Standalone)

Income Statement
Y/E Mar (Rs mn) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Revenue 7,843 9,043 6,660 6,163 10,005 11,991 13,932
COGS 3,643 4,339 3,293 2,874 4,758 5,747 6,671
Employee Cost 546 608 527 519 630 755 878
Other Expenses 2,044 2,085 1,626 1,682 2,369 2,777 3,218

EBITDA 1,611 2,011 1,214 1,089 2,248 2,711 3,165

Depreciation 234 254 265 254 264 281 306
EBIT 1,377 1,756 949 835 1,984 2,431 2,860
Interest Exp. 508 420 322 117 215 100 24
Other Income 72 69 93 34 96 78 103
Profit before Tax 951 1,417 733 765 1,879 2,424 2,955
Tax Expenses 212 815 191 (118) 597 607 741
Profit After Tax 739 601 541 883 1,283 1,817 2,214
Minority Interest 0 0 0 0 0 0 0
Profit/(Loss) from Associates 0 0 0 0 0 0 0
Recurring PAT 739 601 541 883 1,283 1,817 2,214
Exceptional Items 0 0 (2) 5 0 0 0
Reported PAT 739 601 540 888 1,283 1,817 2,214
Other comprehensive income. 0 0 0 0 0 0 0
PAT after comp. income. 739 601 540 888 1,283 1,817 2,214
FDEPS 30.8 25.1 22.5 37.0 47.1 66.7 81.3
DPS 0 0 0 0 0 0 0
BVPS 65 90 112 149 198 264 345

YoY Growth (%) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Sales 12.6 15.3 (26.4) (7.5) 62.3 19.9 16.2
EBITDA (0.5) 24.9 (39.6) (10.4) 106.5 20.6 16.7
EBIT (0.7) 27.6 (46.0) (12.1) 137.7 22.5 17.6
PAT (4.6) (18.6) (10.2) 64.5 44.5 42.0 22.1

Key Ratios
Profitability (%) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Gross Margin 53.6 52.0 50.6 53.4 52.4 52.1 52.1
EBITDA Margin 20.5 22.2 18.2 17.7 22.5 22.6 22.7
PAT Margin 9.4 6.6 8.1 14.4 12.8 15.2 15.9
ROE 59.9 32.4 22.3 28.4 28.6 28.9 26.7
ROIC 20.5 27.1 15.9 13.4 29.0 32.1 31.4
Core ROIC 21.1 27.6 16.2 13.7 29.6 33.3 35.9
Dividend Pay out 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CAGR (%) 1 year 2 years 3 years 5 years 7 years 10 years

Revenue (7.5) (17.4) (7.7) 0.6 2.5 6.3
EBITDA (10.4) (26.4) (12.2) (0.1) 4.1 9.3
PAT 64.5 21.5 6.3 28.4 (274.3) 0.0

Valuation (x) FY18A FY19A FY20A FY21A FY22E FY23E FY24E

P/E 33.4 41.0 45.7 27.8 21.8 15.4 12.6
P/B 15.8 11.4 9.2 6.9 5.2 3.9 3.0
P/FCFF (215.9) 11.8 18.0 (67.6) 16.3 13.4 9.3
EV/EBITDA 20.4 15.5 24.9 27.9 12.9 10.3 8.3
EV/Sales 4.2 3.5 4.5 4.9 2.9 2.3 1.9
Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Balance Sheet
Y/E Mar (Rs mn) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Equity Capital 240 240 240 240 272 272 272
Reserves 1,323 1,914 2,441 3,328 5,124 6,925 9,124
Net Worth 1,563 2,153 2,681 3,567 5,396 7,198 9,396
Total Debt 5,077 3,257 2,382 2,495 1,136 336 236
Other long term liabilities 193 701 781 535 535 535 535
Minority Interest 0 0 0 0 0 0 0
Account Payables 982 913 738 1,176 1,356 1,625 1,888
Other Current Liabilities 220 798 280 196 317 380 442
Total Liabilities 8,035 7,823 6,862 7,969 8,740 10,074 12,497
Gross Fixed Assets 6,950 4,289 4,468 4,709 5,009 5,459 5,759
Acc. Depreciation 3,593 466 726 986 1,249 1,530 1,836
Net Fixed Assets 3,358 3,823 3,742 3,724 3,760 3,930 3,924
Capital WIP 404 14 12 9 9 9 9
long term investments 0 0 0 0 0 0 0
Others 218 306 178 450 270 270 270
Inventory 1,609 1,602 1,306 1,711 2,222 2,663 3,094
Receivables 2,012 1,815 1,277 1,708 1,918 2,299 2,671
Loans and advances 0 0 0 0 0 0 0
Other current assets 284 217 183 263 428 512 595
Cash & Cash Equivalents. 157 47 164 104 134 391 1,934
Total Assets 8,041 7,823 6,862 7,969 8,740 10,074 12,497
Non-Cash WC 2,703 1,922 1,747 2,310 2,894 3,468 4,030
Cash Conv. Cycle 122.8 101.1 101.1 132.8 101.6 101.6 101.6
WC Turnover 2.9 4.7 3.8 2.7 3.5 3.5 3.5
Gross Asset Turnover 1.1 2.1 1.5 1.3 2.0 2.2 2.4
Net Asset Turnover 2.1 2.4 1.8 1.7 2.7 3.0 3.5
Net D/E 3.1 1.5 0.8 0.7 0.2 0.0 (0.2)

Days (x) FY18A FY19A FY20A FY21A FY22E FY23E FY24E

Receivable Days 94 73 70 101 70 70 70
Inventory Days 75 65 72 101 81 81 81
Payable Days 46 37 40 70 49 49 49
Non-cash WC days 126 78 96 137 106 106 106
Cash Flow
Y/E Mar (Rs mn) FY18A FY19A FY20A FY21A FY22E FY23E FY24E
Profit Before Tax 941 1,406 721 752 1,865 2,409 2,939
Depreciation 234 254 265 254 264 281 306
Others (38) (26) 14 (31) 0 0 0
Tax paid 49 349 222 58 597 607 741
Change in WC (224) 247 753 (427) (584) (575) (561)
Operating Cashflow 1,457 2,636 2,283 709 2,261 2,744 3,344
Capex (322) (363) (142) (363) (300) (450) (300)
Change in Invest. 0 0 0 0 0 0 0
Others 0 0 0 0 0 0 0
Investing Cashflow (322) (363) (142) (363) (300) (450) (300)
Change in Debt (704) (1,168) (1,348) (113) (1,359) (800) (100)
Change in Equity 0 0 0 26 560 0 0
Others (502) (412) (337) (109) (119) (22) 79
Financing Cashflow (1,206) (1,580) (1,685) (195) (918) (822) (21)
Net Change in Cash (71) 692 456 151 1,043 1,472 3,024
Source: Company, Equirus Research

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Rolex Rings Limited (ROLEXRIN IN) India Equity Research | Initiating Coverage

Rating & Coverage Definitions: Registered Office:

Absolute Rating Equirus Securities Private Limited
• LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion Unit No. A2102B, 21st Floor, A Wing, Marathon Futurex,
and ATR >= 20% for rest of the companies N M Joshi Marg, Lower Parel,
• ADD: ATR >= 5% but less than Ke over investment horizon Mumbai-400013.
• REDUCE: ATR >= negative 10% but <5% over investment horizon Tel. No: +91 – (0)22 – 4332 0600
• SHORT: ATR < negative 10% over investment horizon Fax No: +91- (0)22 – 4332 0601
Relative Rating
• OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon Corporate Office:
• BENCHMARK: likely to perform in line with the benchmark 3rd floor, House No. 9,
• UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,
Investment Horizon S.G. Highway Ahmedabad-380054
Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of Gujarat
a calendar quarter. Tel. No: +91 (0)79 - 6190 9550
Fax No: +91 (0)79 – 6190 9560

© 2021 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities
Private Limited
Analyst Certification
I, Ashutosh Tiwari/Aashin Modi, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I
also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures
Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital
Market (Reg. No. INZ000251536), Futures & Options Segment (Reg. No. INZ000251536) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No. INZ000251536) of BSE Limited (BSE).ESPL
is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg.
No.INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. [Link]-DP-324-2017). There are no disciplinary actions taken by any regulatory authority against ESPL. ESPL
is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to merchant banking services, private
equity, mergers & acquisitions and structured finance.
As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for investment
banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have received a mandate
from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their directors and employees may
from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in their proprietary position) 1% or more
of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or Associates did not receive any compensation or
other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor Research Analysts have any material conflict of interest at the
time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ESPL has not been engaged in market
making activity for the subject company.
The Research Analyst engaged in preparation of this Report:-
(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c) has
neither received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months nor received any compensation for products or services other
than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation or other benefits from the subject company or third party
in connection with the research report; (e) might have served as an officer, director or employee of the subject company; (f) is not engaged in market making activity for the subject company.
This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication,
availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be
eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable restrictions. Please delete this
document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this document without subjecting ESPL and
affiliates to any registration or licensing requirement within such jurisdiction.
This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on this
report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to its accuracy
or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information contained herein.
While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information current. Also there may
be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to
in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any
particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance
on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its research report. Thus, investors should be aware that the firm
may have conflict of interest.
A graph of daily closing prices of securities is available at [Link] and [Link] (Choose a company from the list on the browser and select the “three
years” period in the price chart).

Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst’ or Relatives’ financial interest No

Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No

Research Analyst’ or Relatives’ material conflict of interest No

Disclaimer for U.S. Persons

Equirus Securities Private Limited (ESPL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition
ESPL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by ESPL, including the products and services described herein are not available to or intended for U.S.
persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional
investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange
Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., ESPL has entered into a chaperoning agreement with
a U.S. registered broker-dealer name called Xtellus Capital Partners, Inc, (''XTELLUS'). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

"U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US
Persons" under certain rules.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, XTELLUS, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

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