Tolins Tyre IPO - Investment Rationale, Issue Details, Financials, Strategies, Risks And More: DRChoksey

Deven Choksey Research Report

Tolins Tyres Ltd. will launch its initial public offering on Sept. 09 and the offer closes for subscription on Sept. 11. The Kerala-based manufacturer of tyres has fixed a price band of Rs 215 to Rs 226 per share.

The Rs 230-crore IPO comprises of fresh issue of equity shares worth Rs 200 crore and an offer for sale of equity shares to the tune of Rs 30 crore.

Objects of the offer

1. Repayment of loan

2. Long term Working Capital requirements

3. Investment in Subsidary

4. General corporate purposes.

Strengths:

• Diversified product range and customised product offering

• Quality Products

• Long standing relationship with large oems and dealer network in india and depots

• Integrated manufacturing operations and in-house design capabilities provide scale, flexibility, and comprehensive solutions

• Locational Advantage

• Research and development and product development capabilities

Outlook & Valuation:

Tolins tyres is a prominent player in the tyre and tread rubber manufacturing sector, with a comprehensive product range encompassing 163 tyre stock keeping units and 1,003 tread rubber SKUs. The company’s strength lies in its diversified product portfolio, customer-centric approach, and stringent quality standards, underscored by low product recall rates.

Operating three strategically located manufacturing facilities in India and the UAE, the company benefits from integrated operations. It is well-positioned to capitalise on the industry's growth drivers.

With a strategic focus on enhancing production capacity, expanding market reach, and pursuing technological advancements, the company is poised for significant growth. It has recorded a revenue CAGR of 41% from FY22 to FY24 and a profit after tax compound annual growth rate of 541% during the same period.

The company is valued at an adjusted PE of 34 times, which is trading at a discount compared to its peers. Moreover, its operating and net profit margins are relatively better compared to those of its peers.

Given its cheaper valuation relative to its peers and healthy growth prospects, the company appears attractive. We have assigned a 'Subscribe' rating for the IPO of Tolins Tyres.

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