Rolex Rings Limited (ROLEXRINGS.NS) Earnings Call Transcript & Summary

No, no. See, definitely, we were supplying, my 100% supply is not on hold. So definitely, we dispatch in the month of July as well as August because we have planned, our customer has already asked for that, and it has been planned in such a way that we cannot hold the supply. And on one fine day, when we -- partially we got dispatched and partially, which is on the way, they simply told any consignment reaches at U.S. port in the second week of September onwards, it will be levied at 50 percentage. So whatever the consignments, which is there from post July 2nd, 3rd week onwards, it's obviously on the way.

And sir, lastly, in terms of domestic auto component business, so are we trying to get some new customers, some new products? What are we -- some more color on the new product strategy there?

See, a couple of customers, which we got the order in the previous year. And in turn, they are going to be used for the EV vehicles over in India and even for the exports of certain EV and hybrid vehicles, which in turn they are going to export. But again, that portion of overseas business, that is on hold. And in the domestic market because of certain changes in the final, the automobile model, and that deferred certain things, maybe almost by 4 to 5 months. But we expect that it would be regained in the -- from December onwards.

We have started getting some new bearing orders from the existing customers, right, Hiren-bhai, 3, 4 item added by one of our customers recently.

So next question is from [ Kush Nahar ].

Sir, my first question was more on the industry side. So I think before bearing rings was made by the OEMs themselves. So I think previously, many of the bearing rings, a particular percentage was made by the OEM and right now there is this theme of outsourcing where the OEM is more focusing on new product development. So I just wanted to know if you could help us with a ballpark number of how much percentage of the requirement is still being made in-house and which can potentially become a TAM for us once they start outsourcing that portion? And secondly, I just wanted an update on any new products that we are working on, on the auto component side? Maybe from the transmission side, are we planning to enter a new segment in the auto industry itself? And on the bearing rings also because we are seeing many OEMs do CapEx in India and abroad. So are we consistently, because we think -- because I think that we have around 30% market share in the industry for bearing rings. So for the incremental capacities that are being put up by OEMs, are we still maintaining that or increasing, which will help us grow business going ahead? These are my questions.

Yes. Let me tell you the first portion of your question that whether the existing customers or bearing manufacturers are having their in-house facility of the producing bearings. Let me tell you, in India or rather even in the overseas market where our customers are based and to whom we are surveyed, hardly 1 or 2 customers having 1 or 2 facility in the Europe where they do forge certain kind of rings in-house. But apart from that, no one is forging or no one is producing forged rings at their own. They all are outsourcing. The major customers in India as well as in overseas market where we do have a good amount of wallet share, they are not at all producing their rings in-house nowadays. Long back they came out and only the one customer is having certain -- couple of facilities where they have certain forging equipment, which also they have already announced that they are winding up or they are just trying to move out of this forging business -- ring business. So that is there. And as you rightly say that even the Indian bearing manufacturers, globally renowned manufacturers who are into expansion mode and recently one of the company also just came that they are going to have this CapEx of so and so. Definitely, we are very much expecting or rather we will be getting some share or some components over there, what they are going to produce from their new facility or from the expanded facility because we at Rolex is having quite a wide range of product capabilities, what we can produce, and these customers are very much aware about the capabilities of the Rolex and the equipments what we can offer. So definitely, one of the customer who is having a plant in Gujarat also, which was not much operationalized or quite underutilized. Now they came up with the industrial bearing ring production and all these things. So they have already offloaded 3 to 4 components to us, and it would be an industrial application. Apart from that, we are consistently having the addition of the bearing rings, types of bearing rings to our existing customers also. And even for the auto components, we are adding different ring gears, gear blends for the different gears, which are there in the automotive transmissions. So we are getting definitely incremental this bearing ring business from the bearing manufacturers out of their expansion.

Sir, apart from that, in terms of competitive landscape, how big would be our next competitor, next capable competitor that we have in India and overseas?

Let me tell you, in India, there are a couple of players who are having partially or you can say -- say, for example, today, we are having more than 25, 26 kind of different forging lines and versatile range and a huge setup of machining shop. Whereas my immediate competitor or you can say a next couple of companies who are having hardly 2 or 3 forging lines, 5 forging lines, max-max with and a very limited range of the products what they are offering, though they are offering the same kind of small products to my customers also, which we would not like to address as of now. But they are quite smaller than us. And we gradually -- again, it's a quite big opportunity in the overseas market also. So we are also growing, they are also growing, but we are trying to get the things in a big way to untap the market where we are not there. The auto components, it is our -- one of the main target in European business as well as in U.S. So where these people or rather any companies which are based in India may not in our competition.

So I'm assuming that incrementally then whatever new plants of the OEMs will come, then we should see our market share also increase from 30% going towards 50% maybe, because we'll get majority of the additional business.

Yes, yes, that would be there. As that 30% the number what you are mentioning, it is for the domestic market share in terms of bearing rings what we are having. And as I told you that a couple of our bearing ring customers have already added new products, which they have -- they are going to produce from the expanded facilities. And what happened, even the certain expansion at our customer level has also been deferred because of this uncertainty or might be having some slowdown in the industrial segment.

Sir, because now that we're in a better position to judge the tariff situation, if you could help us, right, sir, I understand that FY '26 might be flattish to maybe some marginal growth, as you mentioned. But considering the confirmed order book that we have in the pipeline, what kind of growth are we expecting '26 onwards, FY '27, FY '28 for the -- so 2, 3 years after we close FY '26, what kind of growth can we expect?

See, we are very much hopeful or rather we are very much bullish, as I told you, for the fiscal '27, it would be a high teen kind of growth and even that would be continued for the fiscal '28 because the orders what we are talking for which we have already awarded, but yet not started because of certain these obstacles. Definitely it would be started in the last quarter of this fiscal or maybe by the first quarter of next fiscal. And that would be a ramp-up in a big way in the FY '27 and FY '28. So I'm very much bullish on that and we would be having high-teen growth in both this year.

So next question is from [ Mayank ].

So Hiren-sir, my first question is on the global supply chain in this auto component. I mean how has it changed after the tariff thing has been largely stabilized, particularly on the bearings and bearings ring side? I mean what changes you are foreseeing in the next 6 months, if we talk about particularly on U.S. as well as other markets?

See, we do not expect any kind of downfall or any kind of degrowth as far as the U.S. market for our business is concerned, because the components what we have developed, those are quite critical components for my customers also. And to develop such kind of components, it will be minimum -- [Technical Difficulty]. So what I was mentioning that the components what we are supplying to our customers, it took more than 15 to 18 months to develop these things. And to get a new supplier or get a new -- from the new territory, it would be very difficult for our customer to be approach over there. And as now whatever the new duty structure would be, either we are on the same or maybe India would be on a lower side compared to the other continents like maybe China, Europe, or so, we do not expect much of the traction over there. Rather we are expecting incremental this thing post this duty, once the things are stabilized. We do not have much of the issue over there.

So the high teens growth for the next 2 years you're talking about, largely the growth would be in the auto components?

As of now, the order book or rather the orders what we have already received or program received, there are a mixed bag of auto component and bearing rings, but on the higher side as far as auto component business is concerned.

And also, I mean, have you seen some slowdown in the EVs that customers from the EVs globally are procuring less because of shortage?

Yes, definitely EV market has not executed as what it has been expected. On the rather, we are having reduced number. If you must have seen the numbers for the month of October also, what [ SIEM ] has produced, the significant number of vehicles in EV has been reduced rather than incremental numbers in there in the hybrid and petrol, diesel-driven vehicles. So we do not have much of the -- even a good amount of new inquiries are not from EVs. Majority are from hybrid and the current fuel.

So just to understand, how big is EV in your current revenue?

It is with a single digit, it ranges from 7% to 10% max.

And if you are foreseeing good growth in auto components, how it can be in the next 3 years?

Actually, definitely, there would be some kind of gradual improvement over there also, but may not be at the same pace what we are having in the normal IC or hybrid kind of vehicles.

And last question, sir, we are foreseeing very good growth by one of your competitors in the Gujarat market, from Gujarat only. So would you like to comment anything on the competitive intensity in the bearing ring space, particularly in the Indian market?

I don't know the -- for which this thing. But I would like to tell overall in that way that I'm much inclined to utilize my production capacity in a better way, rather to book it with a lower margin product or a smaller kind of components. So certain things what we are not able to take up and what we are requesting our customers that we are not able to supply, definitely, their requirement would be catered by some other players. And obviously, they would be having that incremental revenue, which may be giving a growth. But I strongly suggest you to check the margin and the life of the program and the margin of this thing. That's only what I want to comment beyond that.

So the next question is from the line of [ Saurabh Jain ].

Sir, I just want to understand the order book. On the last call, you had mentioned that we have a monthly order book of around INR 110-odd crores, INR 120-odd crores. And of course, we are seeing some degrowth in this current fiscal. But now for the next fiscal, we'll have a pent-up that INR 175 crores of new projects. Further, as sir mentioned that another INR 50 crores, INR 60 crores of orders, which we have recently bagged 10, 15 days back. So now if we -- I just want to understand how much of this INR 1,050 crores and INR 1,100 crores of revenue, which we are doing as of now is sticky and repetitive in nature? Because if we add that INR 175 crores and INR 50 crores, INR 60 crores for the next fiscal, the growth is north of 20%, in fact, 22%, 23%. So how much of these are -- which of these programs are we exiting in the current fiscal, which are not going to be there in FY '27?

See, as of now, there are no programs which would be expiring in this fiscal or maybe in the next fiscal. So this kind of revenue what we are executing as of now, it would be sticky and it would be on an incremental side. As I was mentioning in earlier calls also that certain new programs, which were supposed to be started at the level of 10,000 components in a month, but because of slower and this thing restricted demand, it has went down to 4,000 or it has started with 4,000, 5,000 components in a month. So that momentum would be there in the next fiscal. Apart from that, the new programs, partially what has been started out of that INR 175 crores, definitely, that would be -- those would be having incremental numbers in the next fiscal. And the new program, what recently we have won before almost a month back only, what we have visit. So that would also be added over there. So broadly, the current revenue, it would be a sticky kind of thing. Definitely, it would be there. And even in the current business, we are going to have some -- expecting some kind of incremental revenue along with the new order book or rather new programs, which would be started with full load. So definitely, we are expecting, as I was mentioning, that high-teen growth compared to this FY '26 in the next couple of years, that is FY '27 and FY '28.

So sir, in that case, we can actually -- are we being very conservative when we are saying that high teens -- earlier you were saying mid-teens growth. And now on this call because of this spillover to the next fiscal, you are saying high teens growth. So is it possible that we can actually see 22%, 24% kind of growth? Because this INR 235 crores, so new projects which are getting into SOP next year, and also we will be getting some more.

Actually this is what I was mentioning, partially, it has started. Even in my existing structure, partial new business has already been started. So it's not that entire INR 175 crores would be added. There has already been addition in the current fiscal also. Because of my existing revenue or existing program, which were on a lower offtake, but the new programs have already been started to some extent, that would be come back or rather that would be on the full pace in the next fiscal. And the existing business, what I have lost in the current year and even in the previous fiscal, that would be again regained. So all put together, that is conservatively what I'm telling you that it would be a high-teen kind of growth. On the numbers what we had, if you say in last fiscal, we had a component revenue of somewhere about INR 11-odd crores -- INR 1,100 crores and then definitely on these numbers, we would be having high-teen growth.

Sir, my next question is on another our biggest client -- one of the biggest clients, which probably you were talking about in another response, in the previous response. And this was about the recent news article, a couple of days back, there was some news article about SKF, which commissioned their new facility in Ahmedabad worth INR 900 crores of CapEx, and they are looking at bearing. This is a dedicated bearing rings -- bearing business above 150 mm. And this is -- in the article, it is mentioned that it is completely a localization exercise. So when we say that we've had some 3, 4 components, are we talking about the same facility or we can expect more from this one? This is not we are currently catering to.

No, definitely, it is from the -- we are expecting more numbers from this facility because this facility is already there or rather installed before a few years back, which was quite underutilized. Now they came out with the overall idea that what kind of rings they are going to produce yet, they are going to freeze or rather finalize the exact specifications of the bearings, what they are going to produce. Definitely, we are the most preferred or rather one of the potential supplier for them. And recently, last week only their senior people, they have already visited our factory and the things are going on. We would be getting definitely more kind of new components from that customer for the particular plant.

Sir, last question from my side. So based on inquiry pipeline and the bids which we would have taken and recent CapEx done by SKF and Timken has done a big, big CapEx, which is underutilized as of now, Schaeffler. So what kind of addition on a conservative basis can we see over the next 1 year to this INR 235 crores of new projects, which we have already announced?

You mean to say the existing business or rather the bearing companies who have announced their expansion and from there, how much we are going to get? Am I...

Yes. Yes, sir. Yes, sir.

See, first of all, I would like to -- or rather you better know that whatever the numbers have been given by the -- for the expansion, first of all, whether that expansion has already been completed or not, that is a question. We have seen certain facilities which are yet to be not on hardly 50%, 60% of expansion might have completed and yet the customers or rather they are not freezing their demand or their production schedule or the kind of products what they are going to produce. I'll not say much on that subject because those are my respected customers. But definitely only all these customers to whom we are dealing, we are supplying for more than 2 decades with them, and we have a very good cordial association with them. And fortunately, we didn't lose any kind of the business what we were doing with this customer, and we are still there as of now. And it would be definitely on an increasing way.

Okay. Sir, just a quick follow-up, if I can squeeze in.

Saurabh, there is a participant waiting, so can you please...

Just one quick follow-up. I won't take much time. Okay. So sir, just if these customers are supposed doing a CapEx of INR 100 crores, so what kind of asset turnover is usual in the industry? And how much of that can actually come to client vendors like us, not specifically Rolex or any customer, but...

See, it would be difficult to compare if my customer is going to set up facility for INR 100 crores and how much business I'm going to get, because that INR 100 crores, we don't know what kind of quantum or what kind of listing products they are going to produce. So I cannot say that if they are going to spend INR 100 crores, I'm going to get x amount or something. But generally, my product contributes somewhere about 15% to 25%, ranging from 15% to 25% of their end product or rather the bearings. So even the expansion of INR 100 crores in what way, which line beyond the range what I'm able to produce, many factors are depend.

So we'll take the next question from Jason.

Sir, just the question pertains to, sir, if you could give the revenue breakup? I think you mentioned it, but just as a recap, I would want the revenue breakup between U.S., India, and Europe for FY '25 and now H1 FY '26 also.

See I told you, for FY '25, my U.S. was somewhere about 31.5%. Europe, it was 17.5%. Other countries like Mexico, Canada, and other all put together is somewhere about 3.5-odd percent. And remaining 47%, 48% was there from the domestic market. In the same kind of numbers for the current fiscal, for the first half, it's say 25% from the U.S. Europe is somewhere about touching 20.5%. Other markets are a couple of percentage. And 52%, 53% from the domestic one.

Sir, just one follow-up. One question I had is, sir, just in terms of competitive landscape, see, I don't want to name the competitors, but just -- I mean, you have a lot of competitors based out of Gujarat itself. You have some prominent competitors who compete with you based out of Jaipur as well. So sir, just wanted to know from a competitive landscape, how do you differentiate yourself from these competitors in the same space, catering to the same big set of clients? So just some color on that, sir, how do you kind of take the strategy towards improving, getting more complex products or getting more business from these clients when you have this competition from Jaipur, Gujarat? Just your -- some take on it.

See, I don't want to highlight any negative or any kind of non-capabilities of the competitors or this thing. Only my intention is to give us, are some USPs or some kind of benefits or what Rolex is carrying. First of all, Rolex is there into the industry, this industry for more than 3 decades. And majority of the customers, whatever we have as of now, having an association of more than 2 decades. So they are very much aware about the capabilities and the facilities. And for Rolex, it is not what we are going to market our products or we are going to [indiscernible] these things. Only my equipments, my facility, the range of the product, the versatilities of the product, the criticality of the components, and with the highest level of precision level what we are producing. One of the U.S. giants, global giants have given me a zero PPM award for 2 years, consistently 2 years for certain kind of auto components. And that is the reason the range of the product. And as I was mentioning, value-added processes, capabilities, what we are adding back, we are able to give the volume as what my customer desired for the particular range of the products. Even if you ask me, we do have facilities where the products carrying maybe a product weighting of 50 kg or even more than that. If you ask me 10,000 numbers in a month. We are able to produce smaller size of components. We are able to produce lakhs of components in a month and already we are dispatching. So we do have good association. And when particularly an existing customer always trying to switch somewhere else when they are not able to meet the quality criteria or we are not able to meet their supply chain and maybe if they are getting quite a huge amount of discount on the pricing, which is generally not possible in our kind of business. But definitely, the market is huge. Obviously, the business, everybody is going to give their wholehearted efforts. And -- but we would be having quite USPs as far as the technicalities -- on technical front only, we are getting better marks. That is what I would like to say.

What we have, we can produce auto parts as well as bearing rings. Our other competitor have only facility to produce bearing rings only. So that is also a difference.

So thank you, everyone, for joining the call. We take that as a last question due to time constraint. And thank you, Hiren-bhai. Over to you for the closing remarks.

Thank you very much for your active participation. And on behalf of Rolex Rings, I would like to assure our investors that the company would be very much concentrated on their efforts. And because of this all kind of turbulences, now we expect that things are being streamlined. Though before a year back, there was some different geopolitical reasons, which I think it has been covered off or rather we are getting positive response from that segment. And again, in this fiscal whatever we had, that has also been almost closed down by this quarter. So we would be having quite good numbers in the coming quarters, and we will definitely revert to our investors with the best of our efforts. Thank you. Thank you very much for attending the call.