Is Tolins Tyres IPO Good or Bad - Detailed Review
06 September 2024
8 min read
00:00 / 00:00
Tolins Tyres Limited is setting off its initial public offering which will be open from September 9, 2024, to September 11, 2024. While considering applying for this IPO, certain questions may arise in your mind, including whether Tolins Tyres IPO is good or bad, whether it is worth investing in it, and so on.
In this article, we will cover the Tolins Tyres IPO review with its business and fundamental analysis to better assess its IPO.
Tolins Tyres IPO - Company Overview
Tolins Tyres Limited was founded in the year 1982 as a small-scale industry unit, to produce tyres. Since then it has emerged as a leading tyre producer by specializing in a wide range of products.
Their product portfolio includes two-wheeler and three-wheeler tyres, light commercial vehicle tyres and also agriculture tyres. In addition to this, Tolins tyres have innovated precured tyre rubber, bonding gums, vulcanizing solutions, tyre flaps, tubes and other retreading products which showcases their cutting-edge technology in the industry.
The company is operated not only in India but also has a presence across 40 countries which include the Middle East, East Africa, Kenya, Jordan and Egypt. They have established two manufacturing plants in Kerala, India as well as one facility in UAE, to develop the standard, quality, durability and technology to adhere to international standards.
As of FY24, Tolins Tyres operates through a network of 3,737 dealers across India and 8 depots. They serve three major market segments: domestic sales, exports and Original Equipment Manufacturers(OEMs).
Tolins Tyres IPO - Customer Base
Tolins Tyres Limited serves a diverse customer base across India and 18 other countries globally. Their domestic customers include public transport undertakings of various state governments, OEMs and dealers. Over the years, they have made strong long-term relationships with their customers having the potential for future deals.
Here is a table showing the revenues from their top three and top 10 customers in those periods.
Customer Group | Customer 1 | Customer 2 | Customer 3 | Top 10 Customers |
FY24 Revenue (Consolidated) | 37.849 | 31.695 | 7.179 | 153.4463 |
FY24 Revenue % | 16.66% | 13.95% | 3.16% | 42.69% |
FY23 Revenue (Standalone) | 7.015 | 5.612 | 2.721 | 28.592 |
FY23 Revenue % | 5.93% | 4.75% | 2.30% | 24.18% |
FY22 Revenue (Standalone) | 5.993 | 5.217 | 2.999 | 30.416 |
FY22 Revenue % | 5.29% | 4.60% | 2.65% | 26.83% |
(Above Figures mentioned in Rs. Crores)
The company’s revenue is increasingly dependent on its top customers. In 2024, the Top 10 customers contributed 42.69% of revenue, up from 24.18% in 2023. Customer 1 and Customer 2 showed the largest increases, contributing 16.66% and 13.95% of revenue in 2024, respectively. This highlights the growing reliance on a few key clients and suggests that there is an increasing dependence on a small number of important customers.
Tolins Tyres Limited IPO - Financial Overview
Key Performance Indicators | FY24 (Consolidated) | FY23 (Standalone) | FY22 (Standalone) |
Revenue from Operations | 227.21 | 118.24 | 113.36 |
Gross Profit | 630.74 | 236.82 | 184.62 |
Gross Margin (%) | 27.76 | 20.03 | 16.29 |
EBITDA | 463.74 | 122.61 | 60.9 |
EBITDA Margin (%) | 20.41 | 10.37 | 5.37 |
PAT | 260.06 | 49.92 | 6.31 |
PAT Margin (%) | 11.45 | 4.22 | 0.56 |
Return on Equity (%) | 25.87 | 25.7 | 5.83 |
Return on Capital Employed (%) | 36.08 | 31.49 | 14.8 |
Debt-Equity Ratio | 0.78 | 2.42 | 4.51 |
The financial performance of Tolins Tyres Limited in the fiscal year 2024 exhibited strong expansion performance. The revenue from operations for the company reached Rs. 227.22 crores, which was higher as compared to Rs. 118.25 crores in the 2023 fiscal year. This presents how much the company has grown across its market territories.
The net worth of the firm has also improved considerably from Rs. 19.42 crore in FY23 to Rs. 100.53 crore in FY24, an indication that it was able to manage its equity. Profit After Tax (PAT) jumped up to Rs. 26.01 crores in FY24 from the previous figure of Rs. 4.99 crores that was recorded during the year FY23.
The company’s Return on Equity (ROE) of 25.87% indicates strong profitability relative to shareholder equity, showing effective use of the shareholder's funds. The Return on Capital Employed (ROCE) of 36.08% reflects the efficient use of both debt and equity to generate returns, highlighting strong operational performance.
Tolins Tyres have a good capital structure and total borrowings are about Rs. 78.77 Crore out of which the long-term borrowings consist of Rs. 8.8 Crores and has a short-term borrowing of Rs. 69.9 Crores. It has a debt-equity ratio of 0.78 which shows that they have balanced out their debts for stability purposes.
Tolins Tyres - Revenue Segment
Here is a table showing revenues from each product segment of the company:
Vertical | FY24 | FY23 | FY22 | |||
Amount (Cr) | Percentage | Amount (Cr) | Percentage | Amount (Cr) | Percentage | |
Tyres | 55.12 | 24.26% | 2.4.2 | 20.97% | 19.40 | 17.11% |
Tread Rubber | 172.09 | 75.74% | 93.45 | 79.03% | 93.96 | 82.89% |
Total | 227.21 | 100% | 118.24 | 100% | 113.36 | 100% |
Tolins Tyres Limited has demonstrated strong overall performance, with significant growth in its core Tread Rubber business and its tyres segment. The company has expanded steadily, with Tread Rubber continuing to be the main revenue driver, while the tyres segment has shown notable growth.
Tolins Tyres IPO - Industry Overview
The domestic tyre industry of India appears all set to grow impressively shortly mainly due to rising vehicle demand across various segments. As the automobile sector continues to expand with rising disposable income and an inclination towards personal transport, original as well as replacement tyres are expected to witness a substantial increase in their need.
In addition to local consumption, there is a rise in global acceptance of Indian tyres which benefits the sector. The export of tyres from India has increased because its manufacturers are venturing into foreign territories. Indian tyres seem more attractive to international markets on account of price competitiveness, quality improvements and innovations that have taken place within this industry.
Moreover, the tread industry situated within the tyre ecosystem in India is booming rapidly. Ownership of cars has gone up significantly while better roads like freeways and national highways have sustained great demand for quality tread rubber that helps with tyre recycling or retreading especially for trucks and other commercial cars thereby making them last longer at a lower cost overall.
Tolins Tyres IPO - Peer Comparison
Tolins Tyres Limited has 5 listed industry peers such as TVS Srichakra Ltd, GRP Ltd, Elgi Rubber Co. Ltd, Indag Rubber Ltd, and Vamshi Rubber Ltd. The detailed comparison is as follows :
Peers | Total Revenues(in Crs) | EPS (Rs.) Basic | NAV (Rs. per share) | RoNW (%) | PAT Margin (%) |
Tolins Tyres Limited | 227.21 | 9.52 | 36.8 | 25.87 | 11.45 |
TVS Srichakra Limited | 2926 | 140.98 | 1451.55 | 9.7 | 3.68 |
GRP Ltd | 461.37 | 169.78 | 1250.57 | 13.58 | 4.91 |
Elgi Rubber Company Limited | 386.44 | 2.33 | 37.91 | 6.15 | 3.02 |
Indag Rubber Limited | 251.18 | 6.15 | 87.46 | 6.79 | 6.2 |
Vamshi Rubber Limited | 77.42 | 1.87 | 32.54 | 4.46 | 0.79 |
As you can see from the above table, Tolins Tyres Limited, has earned a total revenue of Rs. 227.21 Crores. When compared to their peers it stands at the 4th position in terms of revenues.
In the case of earnings per share (EPS), Tolins Tyres Limited has reported a positive figure with a basic EPS of Rs.9.52 reflecting profitability. In contrast, TVS Srichakra Ltd and GRP Ltd have higher earnings per share that is 140.98 and 169.78 respectively.
Additionally, Tolins Tyres Limited boasts a RoNW of 25.87%, showcasing its efficiency in generating profits from shareholders' equity. In comparison, the peer’s RoNW is lower than Tolins Tyres.
Objectives of Tolins Tyres IPO
Repayment or prepayment of loans with an allocation of Rs. 69.97 crores to reduce the company's debt burden.
Augmenting the company’s long-term working capital by investing a substantial Rs. 75 crores to support future operations and growth.
Investing Rs. 23.15 crores in Tolin Rubbers Private Limited, a wholly-owned subsidiary, to repay borrowings and enhance working capital.
General corporate purposes, where a portion of the proceeds will be used for strategic corporate activities.
Additionally, the IPO will strengthen the company's visibility and brand by listing its equity shares on stock exchanges.
Tolins Tyres IPO Details
Tolins Tyres IPO Date
The IPO of Tolins Tyres Limited is open to subscription from September 9, 2024, to September 11, 2024. The shares will be allocated to investors on Thursday, September 12, 2024, and the company will be listed in the NSE and BSE on Monday, September 16, 2024.
Tolins Tyres IPO Issue Price
Tolins Tyres Limited is offering its shares in the price band of Rs. 215 to Rs. 226 per share apiece. This means you would require an investment of Rs. 14,916 per lot (66 shares) if you bid for the IPO at the upper price band.
Tolins Tyres IPO Size
The company is offering a total of 10,176,992 shares, amounting to Rs.230.00 Crores. Out of these, 8,849,558 shares worth Rs.200.00 Crores are offered through a fresh issue, and 1,327,434 shares worth Rs.30.00 Crores are offered through an offer for sale.
Tolins Tyres IPO GMP
As of September 10th 2024 11:32 AM, Tolins Tyres Limited IPO traded at a premium of Rs. 39 (17.26% premium) above the price band of Rs.226 and its estimated listing price is Rs. 265(226+39).
Is Tolins Tyres IPO a Good or Bad Investment? Final Thoughts
Tolins Tyres IPO Review: The company has showcased strong financials and growth potential over the years, both in the form of revenues as well as profitability. Tolins has generated an ROE of 25.87% and ROCE of 36.08% proving the company’s strong fundamentals and position in the industry. However, the company's growing reliance on its top customers should be considered, as it may introduce some risks. It is also a small company when compared to most of its peers in the industry which can be a potential risk for the future of the company.
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