IPO: DOMS Industries

DOMS Industries, a leading stationery manufacturer, is coming up with its IPO (initial public offering) on December 13, 2023. Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality: Its three-year average ROE and ROCE are about 14 and 15 per cent, respectively. Also, it generated positive free cash flows in two of the last three financial years. Growth: Its revenue and net profit grew at an annual growth rate of 23 and 42 per cent, respectively, over the last three years. Moreover, its EBIT and PAT margins have zoomed in the past two financial years. Valuation: The stock is valued at a P/E and a P/B of 50.0 and 6.2 times, respectively, compared to its peers' median and average of 30.5 and 4.7 times, respectively. Overview: Higher government spending on education and literacy will drive growth. However, the high competitive intensity and dependency on FILA remain a threat. About the company Incorporated in 2006, DOMS Industries is a leading stationery and art product manufacturer in India. It has an extensive product portfolio, with over 3,800 distinguishable products. Its core products comprise pencils and mathematical instrument boxes. Strengths of DOM It is the market leader in the Indian stationery and art material industry, with a market share of 12 per cent as of FY23; it has a market share of 29 per cent in pencils and 30 per cent in mathematical instrument boxes. Extensive product portfolio. It offered over 3,800 distinguishable products as of September 30, 2023. Its strategic partnership with FILA, a leading global stationery manufacturer, provides it access to international markets and positions the company to capitalise on emerging global trends. Weaknesses of DOM Revenue concentration. Wooden pencils, one of its core products, accounted for about 32, 34 and 37 per cent of revenue in FY23, FY22 and FY21, respectively. Any headwinds in this segment, in the form of higher competition or lower demand, will have a significant impact. Dependence on FILA. It is reliant on FILA for business operations and R&D capabilities. Hence, any deterioration in its relationship with the international brand will impact its financial performance. IPO details Total IPO size (Rs cr) 1200 Offer for sale (Rs cr) 850 Fresh issue (Rs cr) 350 Price band (Rs) 750-790 Subscription dates Dec 13-15, 2023 Purpose of issue Finance the cost of a new manufacturing facility and general corporate purposes Post IPO M-cap (Rs cr) 4794 Net worth (Rs cr) 772 Promoter holding (%) 75 Price/earnings ratio (P/E) 50 Price/book ratio (P/B) 6.2 Financial history Key financials 2Y growth (% pa) FY23 FY22