DOMS Industries Ltd IPO

Published by Sharekhan Education | December 14, 2023

By Amit Pathak | Sharekhan Education

About the Issue

DOMS Industries Ltd IPO has an issue Size of Rs.1200 Cr and price band is range of Rs.750-790. The issue opens on December 15, 2023 and closes on December 15, 2023.

Company Overview:

DOMS Industries Ltd. engages in designing, developing, manufacturing, and selling a wide range of stationery products. The products, marketed under the flagship brand ‘DOMS,’ position the company as the second-largest player in India’s branded ‘stationery’ products market, holding a market share of around 12%. With 13 manufacturing facilities across Umbergaon, Gujarat, and one in J&K, their partnership with FILA provides access to international markets, enhancing their distribution network and boosting R&D and technological capabilities.

Objectives of Issue:

The IPO comprises a fresh issue of equity shares aggregating to Rs 350 crores and an offer for sale (OFS) of up to Rs 850 crores by existing shareholders. The proceeds from the fresh issue will fund a new manufacturing facility at Umbergaon. The minimum application is for 18 shares, with multiples, thereafter. Post allotment, the shares will be listed on BSE and NSE.

Industry Overview: 

The stationery industry encompasses paper products, writing instruments, computer stationery, school stationery, office stationery, stationery adhesives, and arts & craft products, among others. The market’s growth is attributed to factors such as population increase, education rate, government policies, and economic growth. Digitalization trends contribute to the growth of conventional stationery and art materials as students spend more time in self-study, drawing, and coloring. India also exports stationery products to countries like the United States, the United Kingdom, and the United Arab Emirates.

Competitive Strengths: 

The company boasts a strong consumer-trusted brand, offering a wide and differentiated product category with over 3,800 SKUs. This high brand recall value aids in leveraging their pricing strategy. As one of the topmost stationery brands in India, they have a large following of over 10 lakh followers on YouTube. The company handles end-to-end operations, from conceptualization to distribution, and has backward integrated its manufacturing process. With a widespread multi-channel distribution network, they maintain a strong pan-India presence.

Business Strategy:

The company actively seeks opportunities to introduce new products and identifies potential complementary products to expand their current categories. They aim to increase their distribution channel partners and presence across various retail store formats. Strategic investments, acquisitions, and continuous investment in technology and data capabilities are integral to their business strategy to drive efficiency, stay connected with customers, and strengthen cross-functional synergies.

Key Concerns:

The company is subject to various government regulations, and any deviation may negatively impact business performance. The volatility of key material prices, such as plastic, paper, and pigments poses challenges. Low entry barriers in the stationery industry result in increased competition from several players. The age of digitalization also influences the stationery market, with more people preferring digital apps.

Financials:

The company has delivered revenue growth of 73.4% CAGR over FY21-23, with EBITDA increasing by 149.3% CAGR during the same period. EBITDA margins have expanded from 7.4% to 15.4%, leading to an increase in RoCE from 0.3% to 33.3%. As of March 31, 2023, the annual installed capacity for key products was 473.49 crore units. At the upper end of the price band (₹750-790), the issue appears fairly valued at 50x post-issue FY23 earnings.

Source: IPO Red Herring Prospectus

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