Tolins Tyres IPO Listings: Stock lists flat at near IPO price

Tolins Tyres IPO Listings

Tolins Tyres IPO Listing Disappoints with Flat Opening at ₹227

The highly anticipated IPO of Tolins Tyres Limited, which launched on Monday, September 16, failed to meet investor expectations as it debuted with a lackluster performance.

The company’s shares were listed on the Bombay Stock Exchange (BSE) at ₹227, just marginally above the issue price of ₹226.

This initial listing was a stark contrast to the gray market where Tolins Tyres’ shares were trading at a premium of 13% just before the IPO’s official debut.

IPO Details and Subscription

Tolins Tyres’ IPO was available for bidding from September 9 to September 11, 2024. The company set a price band of ₹215-226 per share, aiming to raise a total of ₹230 crore through this public offering.

Of this amount, ₹200 crore was designated for the issuance of new shares, while ₹30 crore was raised from the sale of existing shares by the company’s promoters.

Investor enthusiasm for Tolins Tyres was evident from the high level of interest and oversubscription. The IPO was subscribed 25.03 times by the end of the bidding period, reflecting strong demand across all investor categories.

Specifically, Non-Institutional Investors (NIIs) demonstrated the highest level of interest, with their subscriptions reaching 28.80 times the portion allocated to them.

Qualified Institutional Buyers (QIBs) and retail investors also showed considerable demand, subscribing 26.72 times and 22.45 times, respectively, to their respective shares.

Use of Proceeds

Tolins Tyres has outlined a strategic plan for the funds raised through the IPO. A significant portion, ₹70 crore, will be used to repay existing debt.

This is a crucial step for the company, as its total outstanding borrowings stood at ₹101.33 crore at the end of FY 2024. By reducing its debt burden, Tolins Tyres aims to strengthen its balance sheet and enhance financial stability.

An additional ₹75 crore will be allocated to address the company’s long-term working capital requirements. This investment is expected to support ongoing operations and ensure smooth business continuity.

Furthermore, ₹46.3 crore will be invested in Tolin Rubbers, a wholly-owned subsidiary of Tolins Tyres, to bolster its growth prospects and expand its operational capabilities.

The remaining funds will be directed towards general corporate purposes, providing flexibility for future business needs.

Company Overview

Tolins Tyres operates in the automotive industry, specializing in the production of a diverse range of tire products.

The company’s portfolio includes tires for two-wheelers, three-wheelers, light commercial vehicles, and agricultural machinery.

Additionally, Tolins Tyres manufactures precured tread rubber and various accessories such as bonding gum, tire flaps, and vulcanizing solutions.

The company has a robust international presence, exporting its products to 40 countries. Key markets include the Middle East, East Africa, Jordan, Kenya, and Egypt. Tolins Tyres competes with other established players in the industry, such as Indag Rubber, Vamshi Rubber, TVS Srichakra, GRP, and Elgi Rubber Company

. This competitive landscape underscores the importance of strategic investments and operational efficiency for maintaining and expanding market share.

Financial Performance

Tolins Tyres has demonstrated impressive financial growth in recent years. For FY 2024, the company reported a net profit of ₹26 crore, marking a substantial increase from ₹4.99 crore in the previous financial year.

This notable improvement reflects the company’s successful operational strategies and market positioning.

Revenue for FY 2024 reached ₹227.2 crore, representing a remarkable 92.2% increase from ₹118.2 crore in FY 2023.

This growth is indicative of the company’s expanding market presence and effective sales strategies. Moreover, Tolins Tyres saw a significant rise in EBITDA, which surged almost fourfold to ₹46.4 crore from ₹12.3 crore in the previous year.

This dramatic increase in EBITDA, coupled with a nearly doubled margin—from 10.4% to 20.4%—highlights the company’s improved operational efficiency and profitability.

Market Reaction and Investor Sentiment

The flat listing of Tolins Tyres’ shares at ₹227 has raised concerns among investors who had high expectations based on the IPO’s robust subscription figures and gray market performance.

Despite the initial disappointment, it is important to consider the broader context of the company’s financial health and growth potential.

The company’s strong financial performance, combined with strategic use of IPO proceeds, suggests that Tolins Tyres is well-positioned for future growth.

The planned reduction of debt and investment in long-term working capital and subsidiaries could enhance operational stability and support continued expansion.

However, market reactions to IPO listings can be influenced by various factors, including broader market conditions, investor sentiment, and overall economic climate.

In this case, the flat opening may reflect a cautious approach from investors or a reassessment of the company’s immediate prospects.

Final Thoughts

The Tolins Tyres IPO, while showing robust investor interest through its high subscription rates, experienced a lackluster debut with shares listing at only a slight premium over the issue price.

This initial performance contrasts with the earlier market expectations, as indicated by the gray market premiums.

Nevertheless, Tolins Tyres’ strong financial results and strategic plans for the IPO proceeds provide a positive outlook for the company’s future.

Investors and market analysts will likely monitor the company’s performance closely in the coming quarters to assess the impact of its debt reduction, working capital investments, and subsidiary expansion on overall growth and profitability.