Tolins Tyres IPO: All You Need To Know

The initial public offering of Tolins Tyres Ltd. will open on Monday to raise up to Rs 230 crore. The IPO consists of a fresh issue of equity shares worth Rs 200 crore and an offer for sale worth Rs 30 crore.

The Kerala-based company has set a price band of Rs 215-226 per share. The market valuation of the company at the upper end of the price band is Rs 893 crore.

Promoters Kalamparambil Varkey Tolin and Jerin Tolin will offload shares worth Rs 15 crore each through the OFS route. They own 83.31% stake in the company at present.

Saffron Capital Advisors Pvt. is the lead merchant banker to the public issue. The company raised Rs 68 crore from anchor investors on Friday ahead of the IPO.

The offer, which concludes on Sept. 11, is set to list on the BSE and the National Stock Exchange.

• Issue opens: Sept. 9.

• Issue closes: Sept. 11.

• Issue price: Rs 215–226 per share.

• Fresh issue: Rs 200 crore.

• Offer for sale: Rs 30 crore.

• Total issue size: Rs 230 crore.

The company plans to use proceeds of the IPO for the following purposes:

• Repayment of borrowings: Rs 69.9 crore.

• Working-capital requirement: Rs 75 crore.

• Repayment of India subsidiary loans: Rs 15.1 crore.

• Working capital of India subsidiary: Rs 8 crore.

The company manufactures tyres for vehicles, including light commercial, agricultural and two- and three-wheeler vehicles and precured tread rubber. It also produces ancillary products like link bonding gum, vulcanising solution, tyre flaps and tubes.

Tolins exports its products to 40 countries, including those in the Middle East, East Africa, Jordan, Kenya and Egypt. It operates from three manufacturing facilities, of which two are located in Kerala and the third one in the UAE.

Tolins is operating at an average capacity utilisation of around 33.4%. It intends to increase the production capacity progressively in the next few years to go up to 75% capacity utilisation under various product portfolios.

The majority of the company's revenue comes from the tread rubber segment. It entered the tyre segment through the acquisition of Rado Tyres.

Currently, while the retread tyres contribute to the majority of the revenue, the company needs to capture the market in a much more meaningful way. Despite being in the tread and retread rubber business for a while, it has only captured around 2.7% of market share in this segment in India.

The company has established itself as a major tyre retreading solutions provider across India and exported to 40 foreign countries, including the Middle East, East Africa, Jordan, Kenya and Egypt. At present, it is exporting to 18 countries. In the last financial year, its export revenue contributed to 5.38% of the total revenue from operations.

The industry as a whole is dependent on Europe and North America as key export geographies, comprising roughly 34% and 21%, respectively. Tolin's current contribution is lower in these geographies. This is also due to the strength of bigger domestic players like Apollo Tyres, Ceat and JK Tyre.

1) Unavailability of key raw materials like carbon black; the top five suppliers contribute roughly 77% of raw materials sourced.

2) Demand driven by OEM and especially with tractors and commercial vehicles serving the agrimarket

3) Disruption in manufacturing facilities in India or UAE

4) Subsidiaries have reported negative free cash flow.

5) Disruption in dealer network

The turnover of tyre industry has doubled in a decade, from Rs 46,000 crore in fiscal 2013 to Rs 90,000 crore in fiscal 2023.

The domestic tyre industry is dominated by major players such as Apollo Tyres, Balakrishna Industries, Bridgestone, Ceat, JK Tyres, MRF and TVS Srichakra. These companies account for more than 80% of the tyre market in terms of revenue.

Global companies such as Michelin, Bridgestone, Goodyear and Maxxis have set up their manufacturing units in India. However, their share in the overall Indian tyre market continues to be low, with customers being price sensitive.

India's tyre exports declined to Rs 23,075 crore in fiscal 2024 from Rs 23,125 crore in fiscal 2023. CRISIL MI&A forecasts overall tyre exports to increase by 7-9% in fiscal 2029, with the two-wheeler tyre segment leading the growth.

With the automobile sector growing, demand for replacement tyres is also increasing. The Indian tyre industry is expected to grow by 4-6% in fiscal 2025, owing to improvements in replacement demand amidst muted growth in the OEM segment.

The replacement segment, which covers 68% of overall tyre production by tonnage, is projected to grow by 5-7%, while the OEM segment is projected to grow by 1-3%. The slow growth in OEM demand is attributable to the expected decline in commercial vehicle sales, which account for ~50% of overall tyre sales by tonnage.