Wheels of opportunity: This tyre manufacturer gears up for a high-speed IPO
Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 41 per cent in revenue and 543 per cent in net profit.
About the Issue
Tolins Tyres Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. See the issue details below.
| IPO Details |
| IPO Opening Date |
September 09, 2024 |
| IPO Closing Date |
September 11, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 5 per equity share |
| IPO Price |
Rs 215 to Rs 226 per equity share |
| Min Order Quantity |
66 shares |
| Listing At |
BSE, NSE |
| Total Issue |
10,176,992 shares of FV Rs 5* |
| (Aggregating up to Rs 230 Cr)* |
| Fresh Issue |
8,849,558 shares of FV Rs 5* |
| (Aggregating up to Rs 200 Cr)* |
| Offer for Sale |
1,327,434 shares of FV Rs 5* |
| (Aggregating up to Rs 30 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Repayment and/or prepayment, in full, of certain outstanding loans availed by the company.
2. Augmentation of long-term working capital requirements of the company.
3. Investment in the wholly owned subsidiary, Tolin Rubbers Private Limited, to repay and/ or prepay, in full, certain of its short-term and long-term borrowings and augmentation of its working capital requirements.
4. General corporate purposes.
Promoter holding
Dr Kalamparambil Varkey Tolin and Jerin Tolin are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 92.64 per cent in the company.
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Company profile
Tolins Tyres Ltd is a leading player in the tyre industry with a nationwide presence and operations in both key segments—manufacturing new tyres and tread rubber.
The company offers a wide range of products, including tyres for two-wheelers, three-wheelers, light commercial vehicles, and agricultural vehicles. It also manufactures precured tread rubber and related accessories such as bonding gum, tyre flaps, and vulcanizing solutions. The company has solidified its position as a leading provider of tyre retreading solutions across India and exports to over 40 countries, including regions like the Middle East, East Africa, Jordan, Kenya, and Egypt.
The company has built long-standing relationships with several well-established Indian and global customers, including Marangoni GRP, Kerala Agro Machinery Corporation Ltd (KAMCO), Redlands Motors, and Tyre Grip, among others, for its products.
The company operates three manufacturing facilities—two in Mattoor, Kalady, Kerala, and a third in the Al Hamra Industrial Zone, Ras Al Khaimah, UAE. The company currently has a consolidated manufacturing capacity of 1.51 million tyres, 12,486 tons of tread rubber, and 17,160 tons of rubber compound across its operations and wholly owned subsidiaries.
Financials
| Rs (in crore) |
FY22 (Standalone) |
FY23 (Standalone) |
FY24 (Consolidated) |
| Revenue |
114.39 |
119.68 |
228.69 |
| Profit before tax |
0.85 |
7.03 |
32.90 |
| Net Profit |
0.63 |
4.99 |
26.01 |
The company has shown consistent growth in both revenue and net profit over recent years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 41 per cent in revenue and 543 per cent in net profit.
In FY23, growth was hindered by escalating crude oil and natural rubber prices, which adversely impacted the company’s profitability. Conversely, FY24 saw a turnaround as declining crude oil and natural rubber prices, combined with expanded capacities, led to significant improvements in both revenue and profitability.
In FY24, the company reported an impressive Return on Equity (RoE) of 26 per cent and a Return on Capital Employed (RoCE) of 36 per cent.
Valuation and outlook
| Company Name |
P/E |
P/B |
RoE (%) |
| Tolins Tyres Ltd |
24 |
3 |
26 |
| Listed Peers |
| Indag Rubber Ltd |
48 |
3 |
7 |
| Vamshi Rubber Ltd |
33 |
2 |
1 |
| TVS Srichakra Ltd |
36 |
3 |
10 |
| GRP Ltd |
73 |
10 |
14 |
| Elgi Rubber Company Ltd |
21 |
13 |
4 |
The issue is priced with a P/BV ratio of 6.14 times, calculated using its Net Asset Value (NAV) of Rs 36.80 as of March 31, 2024. At the upper price cap, it is priced at a P/BV ratio of 2.67 times, considering its post-IPO NAV.
When we calculate the PE ratio for the company by considering the FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 24. Considering both valuation and returns, the company has significantly outperformed its listed peers.
The robust growth of the automobile sector is fuelling considerable demand within the tyre industry, creating substantial expansion opportunities. Leveraging its long-standing relationships with global customers, strategic locational advantages, and a proven financial track record, the company is well-positioned to capitalise on this momentum.
Hence, we advise investors to consider subscribing to the issue with a long-term investment horizon.