Tolins Tyres launched its initial public offering (IPO) on Monday, September 9. The tyre maker is selling its shares in the range of Rs 215-226 per share. Investors can apply for a minimum of 66 equity shares and its multiples thereafter. The issue is open for bidding until Wednesday, September 11.
Incorporated in 2003, Tolins Tyres is a tyre manufacturing company. It provides tyre retreading solutions in India and exports to 40 countries, including the Middle East, East Africa, Jordan, Kenya, and Egypt. The company's business can be divided into two verticals- tyre manufacturing and tread rubber manufacturing.
The Rs 230 crore IPO of Tolins Tyres included a fresh share sale worth Rs 200 crore and an offer-for-sale (OFS) of up to 13.27 lakh equity shares from its promoters. The net proceeds from the issue shall be utilized for repayment of debt; augmentation of long-term working capital requirements; Investment in the wholly owned subsidiary, Tolin Rubbers; and general corporate purposes.
Ahead of its IPO, Tolins Tyres raised Rs 69 crore from 8 anchor investors by allocating them 30,53,097 equity shares at Rs 226 apiece. Its anchor book included names like BofA Securities Europe SA, NAV Capital VCC, Vikasa India EIF, Invicta Continuum Fund, Chhattisgarh Investment, Settrade Revolution Fund, Moneywise Financial Services and Ashika Global Securities.
Tolins Tyres products include light commercial vehicle tyres, off road/agriculture tyres (OTR), two-wheeler & three-wheeler tyres, tyre tubes & tyre flaps, precured tread rubber (PCTR), conventional tread rubber, bonding gum, vulcanizing solution, rope rubber & Others. It operated 8 depots and had 3,737 dealers nationwide, as of March 31, 2024.
Tolins Tyres operates three manufacturing facilities, with two located at Mattoor in Kalady, Kerala, and the third in Al Hamra Industrial Zone in Ras Al Khaimah, UAE. It has 163 stock-keeping units (SKUs) in the tyre category and 1,003 SKUs in the tread rubber category.
For the year ended on March 31, 2024, Tolins Tyres reported a net profit of Rs 26.01 crore with a revenue of Rs 228.69 crore. It has reserved 50 per cent of the net offer for qualified institutional bidders, while 15 per cent of the shares have been reserved for non-institutional investors (NIIs) and retail investors will get 15 per cent and 35 per cent of the net offer.
Saffron Capital Advisors Private Limited is the book running lead manager of the Tolins Tyres IPO, while Cameo Corporate Services Limited is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with September 16 as the tentative date of listing. Here's what brokerage firms said about the IPO of Tolins Tyres:
Swastika Investmart Rating: Neutral Tolins Tyres offers product diversity and has a widespread customer base, including domestic and international customers. A smaller player, gradually expanding. Its strong financial performance with consistent growth. The IPO's valuation appears reasonable, said Swastika Investmart.
"Investors seeking long-term exposure to the tyre industry may consider applying for the Tolins Tyres IPO, recognizing the potential challenges posed by the competitive landscape and IPO timing," it added.
Indsec Research Rating: Subscribe Tolin Tyres is valued at a P/E of 34.8 times based on FY24 EPS, suggesting a fair valuation in line with its peers. The company has delivered robust growth in revenue, Ebitda and PAT at a CAGR of 42 per cent, 176 per cent and 542 per cent from FY22 to FY24, respectively, driven by capacity expansion and vertical integration, said the IPO note from Indsec Research.
"As a leading player in tyre retreading, Tolin also manufactures tyres and plans to expand into the radial tyre market and the aerospace and defense sectors. With growth opportunities in agricultural and EV segments, and reasonable valuations, we assign a 'subscribe' rating to the issue," it said.
Choice Broking Rating: Subscribe with caution Tolins Tyres operates in both the manufacturing of new tyres and tread rubber. Majority of its revenue is derived from the Tread rubber segment. The company’s success is driven by its strong, long-term relationships with a range of prominent Indian and global clients, contributing to its improved financial performance, said Choice Broking.
"The current valuation already reflects most of the company's positive factors. A large portion of the Indian retreading industry remains unorganized, and the sector in which the company operates is highly competitive. A significant part of the company’s revenue comes from Kerala, which exposes it to geographic concentration risk," it added with a 'subscribe with caution' tag.
StoxBox Rating: Subscribe "Tolins Tyres is expected to ride on the sectoral tailwinds and capitalise on market opportunities. The issue is valued at a P/E of 23.7 times on the upper price band based on FY24 earnings, which is deemed fair compared to its peers. Therefore, we recommend a 'subscribe; rating for the issue," said StoxBox.
Canara Bank Securities Rating: Subscribe Recent acquisition of Rado Tyre’s plant has boosted Tolins' capacity from 1,000 to 5,000 tyres per day. Tolins Rubber, a subsidiary, focuses on natural rubber procurement and operates a mixing plant, contributing to overall profitability. Tolins benefits from better margins through strategic rubber stockpiling and tax efficiencies via its UAE subsidiary, said Canara Bank Securities.
"Apollo Tyres has chosen Tolins for outsourcing, leading to the establishment of a new factory generating Rs 11-12 crore in revenue. Balkrishna Industries has shown interest in investing in Tolins through pre-IPO placements, indicating strong investor confidence. The issue is attractively priced as an opportunity given its growth prospects," it said with a subscribe' rating.