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    Rolex Rings

    ROLEXRINGSMixed
    Automobile and Auto Components·19 Feb 2025
    Management Summary

    Rolex Rings reported a challenging Q3 FY25 with revenue and PBT declines, primarily due to a significant slowdown in overseas bearing ring markets and an extraordinary provision for debt restructuring. Despite the headwinds, the company remains positive about future growth, having secured new orders worth ₹175 crores for FY26, with a strong ramp-up anticipated over the next two fiscal years. Management expects a 15-20% revenue growth and 22-23% EBITDA margins for FY26, driven by new business and a shift towards domestic auto components.

    Highlights

    8
    • Q3 FY25 Revenue from operations at ₹259-260 crores, down 5.1% YoY (from ₹273 crores in Q3 FY24) and down 13.7% QoQ (from ₹300 crores in Q2 FY25).

    • Q3 FY25 EBITDA margin at ~21%, up from ~20.5% in Q3 FY24 but down from 24.4% in Q2 FY25.

    • Q3 FY25 PBT at ₹45 crores, down 10% YoY (from ₹50 crores in Q3 FY24) and 30.8% QoQ (from ₹65 crores in Q2 FY25).

    • PAT impacted by an extraordinary provision of ₹18.6 crores for debt restructuring liability (ROR).

    • Nine-month FY25 revenue from operations stood at ₹871 crores, a 2.9% YoY reduction, with EBITDA margin at 23.3% (up 4% YoY).

    • Secured new orders worth ₹175 crores for FY26, with 25-30% ramp-up expected in FY26 and 50-60% in FY27, potentially adding ~₹250 crores in FY27.

    • Guidance for FY26 revenue growth of 15-20% and EBITDA margins of 22-23%.

    • Domestic revenue share increased to 52% (9M FY25) from 48% (9M FY25 exports), driven by auto components.

    Concerns

    1
    • Overseas market slowdown (Europe, US) impacting bearing rings segment.

    What Changed3

    vs Q4 FY25

    Tone shiftGood → MixedGuidance items11 → 9 (-2)Risks discussed6 → 3 (-3)
    Key financials

    Metrics

    9

    Periods

    2

    Headline

    4
    • Revenue from Operations
      ₹259 Cr
      YoY-5.1%QoQ-13.7%
    • EBITDA Margin
      21%
      YoY+2.4%QoQ-13.9%
    • PBT
      ₹45 Cr
      YoY-10%QoQ-30.8%
    • Extraordinary Provision (ROR)
      ₹18.6 Cr

    9M

    5
    • FY25 Revenue from Operations
      ₹871 Cr
      YoY-2.9%
    • FY25 EBITDA
      ₹207 Cr
    • FY25 EBITDA Margin
      23.3%
      YoY+4%
    • FY25 PAT
      ₹119 Cr
      YoY-23.7%
    • FY25 PBT
      ₹177 Cr
      YoY+13.5%

    Segment breakdown

    9M FY25 Revenue Mix
    55% Auto Component Share45% Bearing Rings Share48% Exports Share52% Domestic Share
    9M FY25 Application Mix
    46% Passenger Vehicle17.3% Industrial29% Commercial Vehicle (Domestic/US)7.7% EV and Hybrid
    9M FY25 Segment Revenue (Absolute)
    ₹247 Cr Domestic Bearing Ring₹134 Cr Domestic Auto Component₹116 Cr Export Bearing Ring₹303 Cr Overseas Auto Components₹59 Cr Scrap Export Windmill₹12 Cr Export Incentives
    List

    Guidance & targets

    9
    CategoryTargetPriority
    Revenue
    New Order Wins
    ₹175 crores
    High
    Revenue
    Additional Supply from New Orders
    ₹250 crores
    High
    Revenue
    Q4 FY25 Revenue
    ₹300 crores
    Medium
    Revenue
    Revenue Growth
    15-20%
    High
    Revenue
    Revenue Growth
    15-18%
    High
    Volume
    New Programs Ramp-up
    25-30%
    Medium
    Volume
    New Programs Ramp-up
    50-60%
    Medium
    Debt
    ROR Liability
    ₹50.60 crores
    High
    Profitability
    EBITDA Margins
    22-23%
    High

    Risks & concerns

    4
    RiskSeverity

    Overseas market slowdown (Europe, US) impacting bearing rings segment.

    Drastic reduction in overall bearing rings market, both domestic and overseas, due to economic conditions and deferment of CapEx by major players, with recovery expected in 'a couple of quarters or something like that'.Management acknowledged

    high

    Potential for additional ROR charges beyond the current ₹50.60 crore provision.

    While ₹50.60 crore has been provided based on CDR approval, negotiations with lenders might lead to additional components for delay from 2022-2025.Analyst acknowledged

    medium

    Stagnant EV segment growth and slower-than-expected adoption.

    The curve of moving EV segment up has been 'bit stagnant as of now,' with new orders predominantly (65%) being for non-EV hybrid segments.Management acknowledged

    medium

    Areas of Evasion(1)

    • precise timeline for market recovery in bearing rings segment

    Q&A highlights

    3

    “maximum what we are expecting, the liability for this kind of thing is to the extent of 50.60 crore... Now if there are certain ah ah while calculating these things in detail while negotiating with the lenders, this figure may, they may, you know, are going to ask bit on that some additional, component on the delay of, this from 2022 to 2024 or 2025 till the time of final payment.”

    Clarifies the financial impact of a significant one-time item and acknowledges potential for future liabilities, which could affect profitability.

    asked by Jason Soane

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 FY25 Performance Overview

    Rolex Rings reported a net revenue from operations of ₹259-260 crores in Q3 FY25, marking a 5.1% decline year-on-year from ₹273 crores in Q3 FY24 and a 13.7% sequential drop from ₹300 crores in Q2 FY25. EBITDA margin for the quarter was approximately 21%, a slight improvement from 20.5% in Q3 FY24 but lower than 24.4% in Q2 FY25. Profit Before Tax (PBT) stood at ₹45 crores, down from ₹50 crores in Q3 FY24 and ₹65 crores in Q2 FY25, primarily due to an extraordinary provision of ₹18.6 crores for debt restructuring liability.

    02

    Segmental Performance and Mix Shift

    For the nine months of FY25, auto components constituted 55% of revenue, while bearing rings accounted for 45%, a reversal from previous trends due to a drastic reduction in the bearing rings market. Domestic revenue increased to 52% of the total, with exports at 48%, mainly driven by auto component business. The passenger vehicle segment grew to 46%, industrial to 17.3%, and commercial vehicle (domestic/US) to 29%, with EV and hybrid segments contributing 7.7%.

    03

    New Order Wins and Future Outlook

    The company has secured new orders worth approximately ₹175 crores for FY26, with a significant portion from new customers and new programs. Management expects a 25-30% ramp-up of these new programs in FY26, increasing to 50-60% in FY27, potentially adding around ₹250 crores in additional supply for FY27. These orders are primarily for auto components and exports to Europe and USA, with some domestic bearing ring business also secured.

    04

    CDR Settlement and ROR Provision

    Rolex Rings has made an extraordinary provision of ₹18.6 crores in Q3 FY25 towards the Right of Recompense (ROR) liability for debt restructuring from 2013. Management expressed confidence that the maximum liability would be restricted to ₹50.60 crores based on the CDR approval letter. While acknowledging potential for additional components related to payment delays, the company aims to settle this by March 2025 with a one-shot payment, expecting a waiver on the requested ₹73 crores from lenders.

    05

    Market Challenges and EV Transition

    The decline in bearing rings revenue, particularly exports, is attributed to a significant slowdown in overseas markets (Europe and US) and deferment of CapEx by major bearing players. Management indicated that this weakness might persist for another one or two quarters. Regarding the EV transition, while the company has secured EV-related orders, the ramp-up in the EV segment has been 'stagnant,' with new orders predominantly (65%) being for non-EV hybrid segments.

    06

    FY26/FY27 Growth and Margin Guidance

    Looking ahead, Rolex Rings is optimistic about the coming fiscal years. For FY26, the company anticipates a revenue growth of 15-20% and aims to achieve EBITDA margins of 22-23%, driven by new business and improved scale of economy. For FY27, a growth of 15-18% is expected. The company is also targeting a Q4 FY25 revenue of around ₹300 crores, aiming to match its previous fiscal year's annual performance.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.