Rolex Rings

Rolex Rings reported a strong sequential performance in Q4 FY25, with net revenue (components and scrap) reaching ₹284 crores, marking a 9% growth from ₹260 crores in Q3 FY25. EBITDA for the quarter was ₹62 crores, up from ₹55 crores in the previous quarter. PAT saw a significant increase to ₹55 crores, compared to ₹20 crores in Q3 FY25, which had included an extraordinary provision of ₹18.6 crores. This recovery was attributed to incremental numbers in both bearing rings and auto components, particularly from new customer additions in Q4.

For the full fiscal year FY25, total component and scrap revenue stood at ₹1154 crores. Exports contributed ₹553 crores (53% of total), while domestic sales accounted for ₹601 crores (47%). The segmental mix showed auto components as the larger segment at 55%, with bearing rings at 45%. End-application industries were dominated by passenger vehicles (46%), followed by commercial/heavy commercial vehicles (29%), industrial (17%), and EV hybrid (8%). FY25 EBITDA was ₹269 crores (23% margin), slightly down from ₹277 crores (22.4% margin) in FY24, while PAT increased to ₹174 crores from ₹156 crores in FY24.

Management anticipates 2-5% growth in Q1 FY26, with significantly better numbers expected from Q2 FY26 onwards, driven by new orders and dispatch plans. A substantial ₹175 crores worth of revenue from new orders is expected to flow in from Q2 FY26, representing approximately 15% of FY25 revenue. The auto component segment is projected to be a primary growth driver, expected to constitute over 50% of the business for the next couple of years. Overall revenue growth is guided at 15% for FY26 and 15% or high teen growth for FY27, with a general expectation of 10% growth for the next two years.

Capex plans for FY26 are set at ₹30-40 crores, primarily for new equipment, additional facilities, and value-added processes. For FY27, Capex is projected to be ₹40-50 crores. The company expects its EBITDA margin to conservatively be in the range of 23.5-24% for FY26, with a further improvement to more than 24% in FY27. This margin expansion is linked to increasing operating leverage as revenues grow.

The bearing ring market, particularly overseas and in Europe, has experienced sluggishness and a slowdown, leading to a hit in this segment. Management indicated that full recovery for the bearing ring business, which saw a 35-40% decline, is expected to take at least 4 to 6 quarters from Q3 FY25. Factors contributing to this include unemployment, high power costs, overall demand issues, and geopolitical threats in Europe, leading to plants operating at 25-40% capacity.

Management shared a cautious view on the rapid penetration of the EV market, citing significant infrastructure challenges in developed countries like Germany and the US, and consumer preference for ICE vehicles as primary cars. Despite this, Rolex Rings is well-equipped for EV and hybrid components, having secured orders from domestic OEMs and American/European EV manufacturers for SUV and sedan components. The company emphasizes the higher value addition and precision required for EV gearbox components, which they are already supplying.

The company provided clarity on the ROR issue, stating that a legal opinion from a renowned firm, obtained just before the board meeting, concluded that compounding of interest would not be applicable based on the executed documents and agreements. This opinion supports the company's stance against the bankers' demand of ₹227 crores. Rolex Rings has requested its lead bank to revise or withdraw the demand letter, and the bank is in the process of expediting the same, suggesting a favorable outcome for the company.