Tolins Tyres Share Make a Muted Market Debut, Listing Flat at Nearly IPO Price
Tolins Tyres Limited made its stock market debut, but the response was less than enthusiastic. The shares opened at ₹227 on the Bombay Stock Exchange (BSE), which is just a 0.4% premium over the upper limit of the IPO price band of ₹226. This lukewarm reception contrasts sharply with the expectations set during the IPO subscription period, where the offer was oversubscribed by 23.87 times.
Main Points
The initial public offering (IPO) of Tolins Tyres comprised a fresh issue of shares worth ₹200 crore and an offer-for-sale component of ₹30 crore. The company had set a price range of ₹215 to ₹226 per share. The robust investor interest was evident, especially among non-institutional investors, who subscribed 27.41 times, while qualified institutional buyers (QIBs) and retail investors subscribed 25.42 times and 21.47 times, respectively.
Tolins Tyres is a Kerala-based manufacturer specializing in tyre production and retreading solutions. The company exports its products to over 40 countries, including regions in the Middle East and East Africa. In the fiscal year 2024, Tolins Tyres reported revenues of ₹227 crore, a significant increase from ₹118 crore in FY23. The net profit also saw a remarkable rise from ₹4.99 crore in FY23 to ₹26 crore in FY24, indicating strong growth potential.
The proceeds from the IPO are earmarked for several purposes: ₹75 crore will bolster long-term working capital, ₹62.55 crore will be used for debt repayment, and ₹24.36 crore will be invested in its subsidiary, Tolin Rubbers, to enhance its working capital and pay off debts. This financial strategy aims to improve the company’s operational efficiency and reduce its debt burden.
Despite the strong subscription rates and positive financial indicators, the actual market performance of Tolins Tyres shares did not meet expectations. Prior to the listing, shares were trading in the grey market at a premium of around 13%. Investors had anticipated a more significant jump on listing day, but the flat opening price indicates a disconnect between market sentiment and actual performance.
The muted debut could be attributed to various factors, including market conditions and investor sentiment towards the tyre manufacturing sector, which is known for its cyclical nature. The industry faces challenges such as fluctuating raw material prices and competition from established players.
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Tolins Tyres Company Insights
Tolins Tyres operates through two main verticals: tyre manufacturing and tread rubber production. The company has a consolidated capacity of 1.51 million tyres and produces 12,486 tons of tread rubber annually. However, current capacity utilization stands at only 33%, indicating room for growth. The company plans to gradually ramp up production over the next five years, which could enhance its market position if executed effectively.
The company’s operational efficiency is a key strength. It has maintained stringent quality control measures and timely delivery, which are crucial in the competitive tyre industry. The increase in revenue from ₹51 crore from new tyre sales in FY24, accounting for 24% of total sales, shows a positive trend towards diversification in its product offerings.
The initial investor sentiment appears cautious. The flat listing may lead some investors to reassess their positions in the stock, especially those who had high hopes based on the oversubscription rates. Analysts suggest that while the fundamentals of Tolins Tyres are strong, investors should keep an eye on how the company manages its working capital and operational efficiency in the coming quarters.
Looking ahead, Tolins Tyres has set ambitious goals to increase its production capacity and expand its market reach. The management is optimistic about leveraging the funds raised through the IPO to support these initiatives. However, the company must navigate the challenges of the tyre manufacturing industry, including cost management and market competition, to sustain its growth trajectory.
As the market digests the debut performance of Tolins Tyres, investors will be keen to see how the company executes its growth strategy and whether it can deliver on the promise shown during the IPO phase.
Disclaimer: The information given in this article is from investment experts and brokerage companies, they do not represent Local Haryana. Before taking any investment related decision, you must consult a certified expert.
