The company’s go-to-market strategy involves utilising dealers and distributors (B2C), focusing on fleet operators by offering quality comparable with leading tyre brands at a significant discount. In contrast, its competitors have concentrated on state transportation businesses (B2G), compressing net margins.
Tolins Tyres operates a plant in the UAE – the only tread rubber plant in the region – which gives it a broad overseas market. The company is entitled to issue recycle certificates for tyres, which would be an incremental income with no expense. Given these factors, long-term investors may find the company’s IPO appealing.
Business Model: Tolins Tyres, established in 2003, is a leading manufacturer of tread rubber – a cost-effective alternative to new tyres – with approximately 1,003 stock-keeping units (SKUs). The company produces a wide range of tyres for light commercial vehicles, motorcycles, three-wheelers, and off-road vehicles. It operates three plants – two in Kerala and one in the UAE – with a combined capacity of 1.51 million tyres and 12,486 tonnes of tread rubber. About 75% of revenue comes from tread rubber and the rest from tyres.Financials: From FY22 to FY24, Tolins’ revenue grew 41% annually to touch βΉ227 crore, while Ebitda rose to βΉ46.4 crore from βΉ6.1 crore, with an Ebitda margin of 20%. Net profit grew to βΉ26 crore in FY24 from βΉ4.9 crore in FY23. Tolins’ return on equity of 25.87% is superior to its peers.
Risks: Raw material accounts for 96% of the company’s total purchases, and natural rubber prices have been quite volatile in recent months.
Valuation: At the higher end of the price band, the company is seeking a price-earnings multiple of 34 times its FY24 earnings. In comparison, competitors such as Indag Rubber, Vamshi Rubber and GRP are trading at multiples ranging from 33 to 67 times.
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