IPO: Flair Writing Industries

Flair Writing Industries, a company that manufactures writing instruments, will launch its initial public offering (IPO) on November 22, 2023. Below is a breakdown of the company's strengths, weaknesses and growth prospects to help investors make an informed decision. In a nutshell Quality : The three-year average ROE and ROCE of Flair Writing are 16.8 and 16.2 per cent, respectively. For FY23, the company's ROE and ROCE were 31.2 and 31.2 per cent, respectively Growth : Its topline grew at 80 per cent annually, while net profit jumped multiple times during FY21-FY23. Valuation : The stock will be priced at a P/E and P/B of 27.1 and 4.2 times, respectively, compared to its peers' median and average of 44.3 and 6.4 times, respectively. Overview : The company aims to expand its existing product portfolio and diversify its product range, with an emphasis on the mid-premium and premium segments. This may improve its margins in the future. About the company Flair Writing is among the top three players in the writing instruments industry in India. It occupies a market share of approximately 9 per cent in India's overall writing and creative instruments segment as of FY23. The company's flagship brand 'Flair' has enjoyed a significant market presence of over 45 years and also acquired rights to other brands such as 'Hauser', 'Pierre Cardin' and 'ZOOX'. Recently, Flair Writing forayed into manufacturing houseware products and steel bottles to leverage its manufacturing capabilities. Apart from manufacturing for its brands, Flair also does contract manufacturing of writing instruments. As of June 2023, the company had 11 manufacturing plants in Gujarat, Maharashtra, Daman and Diu and Uttarakhand. Strengths of Flair Writing Strong market position: The company offers products under the brands 'Flair', 'Hauser', 'Pierre Cardin' and 'ZOOX'. It is among the top three players, with a market share of around 9 per cent in India's writing and creative instruments industry and a 7.1 per cent share in exports. Largest dealer and wholesale network in India: The company has about 7,700 distributors/dealers and approximately 3,15,000 wholesalers/retailers with a retail distributor presence in 2,424 cities, towns and villages in India. Remarkable volume growth: Flair Writing achieved a 46 per cent per annum growth rate in sales volumes from FY21 to FY23, backed by an increased capacity and capacity utilisation. Weaknesses of Flair Writing Stiff competition in the mass market sub segment: The company faces limited pricing power in the Rs 5 to Rs 15 segment for writing instruments, primarily targeted at students. Price rise may risk a shift in demand to alternative brands. Management expects that competition will continue to intensify through the entry of new players and consolidation of existing players. High cash conversion cycle : The company consistently maintains a high level of inventory, which affects its cash conversion cycle. While this has not had any major impact so far, it should be monitored. IPO Details Total IPO size ( Rs Cr) 593 Offer for sale (Rs Cr) 301 Fresh Issue (Rs Cr) 292 Price Band (Rs) 288-304 Subscription dates November 22-24, 2023 Purpose of issue To fund capex and offer for sale Post-IPO M-cap (Rs cr) 3131 Net worth (Rs cr) 758