DOMS Industries IPO – Dates, Positives, Risks and Review

DOMS Industries IPO Review and Analysis

DOMS Industries is coming up with an IPO scheduled to open on December 13, 2023. DOMS Industries Limited is a stationery and art product company primarily engaged in designing, developing, manufacturing, and selling a wide range of these products under the flagship brand, DOMS. This article provides insights into DOMS Industries IPO, including its dates, details, price band, GMP, positive aspects, risk factors, and provides a complete review and analysis.

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About DOMS Industries Corporation Limited

Company design, develop, manufacture, and sell a wide range of stationery and art products, primarily under our flagship brand ‘DOMS’, in the domestic market as well as in over 45 countries internationally.

They are the second largest player in India’s branded ‘stationery and art’ products market, with a market share of ~12% by value, as of Fiscal 2023 (Source: Technopak Report).

Its keen focus on research and development, product engineering, and backward integrated manufacturing, operations, combined with our multichannel pan-India distribution network has enabled them to achieve a strong brand recall amongst consumers.

Its core products such as ‘pencils’ and ‘mathematical instrument boxes’ enjoy high market shares; 29% and 30% market share by value in Fiscal 2023  respectively.

They offer well-designed and quality ‘stationery and art material’ products to consumers, which they classify across seven categories:

(i) scholastic stationery

(ii) scholastic art material

(iii) paper stationery

(iv) kits and combos

(v) office supplies

(vi) hobby and craft

(vii) fine art products

DOMS Industries IPO Dates, Price Band and Size

Objects of the IPO

DOMS Industries IPO Size is Rs 1,200 Crores which contains both fresh issue and OFS.

#1 – Offer for Sale (OFS) for Rs 850 Crores – This goes to the selling shareholders and the company would not get any proceeds.

#2 – Fresh issue of Rs 350 Crores – These funds would be used for the following:

• Proposing to partly finance the cost of establishing a new manufacturing facility to expand its production capabilities for a wide range of writing instruments, watercolor pens, markers, and highlighters.
• General corporate purposes.

About Company Financials

DOMS Industries IPO Price Valuation

• The IPO price band is Rs 750 to 790 per share
• P/E Ratio Analysis
  • If we consider the last year FY23 EPS of Rs 18.29, the P/E ratio works out to be 43x
  • If we consider last 3 years weighted EPS of Rs 9.98, the P/E ratio works out to be 79x
• Comparison with listed peers
  • Kokuyo Camlin Limited trading at P/E 64x (Highest)
  • Navneet Education Limited is trading at P/E of 16x (Lowest) and
  • industry average P/E is 36x
• Hence, the IPO Price band at P/E of 43x to 79x is over-priced

Positive Factors to invest in DOMS Industries IPO

Investing in the IPO of this company may be considered for several reasons:

• Market Leadership and Strong Brand Recall: The company holds the second-largest market share in India’s branded stationery and art products market (~12% by value), indicating a strong market position.
• The brand, particularly the flagship ‘DOMS,’ enjoys a strong recall among consumers due to its focus on high-quality, innovative, and differentiated products.
• Wide Product Range and Global Presence: The company boasts a diverse product portfolio spanning seven categories, providing a wide breadth of offerings.
• International presence in over 45 countries signifies a global market reach, reducing dependency on a single market and opening up opportunities for further expansion.
• R&D and Innovation Focus: Emphasis on research and development, product engineering, and backward integrated manufacturing indicates a commitment to innovation and product quality.
• High market shares in core products such as pencils and mathematical instrument boxes demonstrate success in meeting consumer needs.
• Consistent Financial Performance: The company has shown impressive financial performance over the last three fiscal years, with robust growth in Gross Product Sales and revenue.
• The increase in EBITDA margin and Return on Capital Employed (ROCE) reflects operational efficiency and effective capital utilization.
• Strategic Partnerships: The strategic partnership with F.I.L.A.- Fabbrica Italiana Lapis ed Affini S.p.A. provides access to global markets and product know-how, which can contribute to further growth.
• Growth Strategies: Clearly defined growth strategies, including expanding manufacturing capacities, supplementing the product portfolio, strengthening distribution networks, and exploring inorganic growth through acquisitions or partnerships, indicate a proactive approach to business expansion.
• Technology and Data Capabilities: A focus on strengthening technology and data capabilities underscores a commitment to leveraging modern tools for business efficiencies, indicating adaptability to industry trends.

Negative or risk factors of investing In this IPO

• OFS portion to selling share holders: The IPO objectives contain both OFS and fresh issue. OFS portion goes to selling shareholders and company would not benefit.
• Product Concentration Risk: The company heavily relies on a small set of key products, with a significant portion of Gross Product Sales derived from them. Specifically, ‘wooden pencils’ contribute a substantial percentage. Any decline in sales of these key products could adversely affect the business.
• Distribution Risk: The company is heavily dependent on its ‘general trade’ distribution network, representing more than 70% of Gross Product Sales in recent fiscal periods. Inefficient management of this distribution network could have a negative impact on business operations and financial condition.
• Litigation Concerns: The company is currently facing civil litigation from one of its listed peers. An adverse decision in this proceeding could potentially harm the company’s reputation, business, and financial condition.
• Dependence on FILA Group: The company’s dependence on the FILA Group for business operations and export sales raises concerns. A significant portion of export sales is tied to FILA, and any change in its status as a promoter or damage to its reputation could impact the company’s operations and capabilities.
• Supply Risk: Lack of formal contracts or exclusive arrangements with suppliers and dependence on limited suppliers for raw materials pose a supply risk. Inability to procure materials at favorable terms or at all could adversely affect the company’s business, financial condition, and results of operations.
• Competition Pressure: The company faces significant competitive pressures, and an inability to compete effectively may have a material adverse effect on its business, prospects, operations, or financial results.
• Historical Losses: The company has incurred losses in the past, indicating potential challenges in generating consistent profits.
• Negative Cash Flows: Historical negative cash flows and the possibility of continued negative cash flows in the future could adversely affect liquidity and operations, raising concerns about financial stability.
• Investors should go through all risk factors indicated in DOMS Industries IPO RHP.

DOMS Industries IPO GMP

DOMS Industries IPO GMP is not available as there are no trades happening in the offline trading.

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DOMS Industries IPO – Should you buy or not?

Investors should consider all pros and cons before assessing whether this IPO is good or bad for investment.

• The company’s IPO presents attractive investment opportunities due to its strong market position as the second-largest player in India’s branded stationery and art products market. With a wide product range and international presence in over 45 countries, the company has demonstrated rapid growth, achieving a CAGR of 72.69% and 73.45% in Gross Product Sales and revenue, respectively, from Fiscal 2021 to Fiscal 2023. Consistent financial performance and a robust distribution network further contribute to the company’s strengths.
• However, investors should also consider the risk factors of investing in this IPO. These include a high concentration of Gross Product Sales in a few key products, particularly ‘wooden pencils,’ which poses vulnerability to a decline in sales. Dependency on the ‘general trade’ distribution network, ongoing litigation, reliance on the FILA Group for a substantial portion of export sales, and lack of formal contracts with suppliers introduce operational and reputational risks. Additionally, historical losses, negative cash flows, and stiff competition in the industry raise concerns about the company’s overall financial stability and its ability to navigate challenges in the market.
• The IPO is also fully priced.

Investors can invest in this IPO after considering all positive and risk factors.

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Suresh KP

Founder at Myinvestmentideas.com

Suresh KP is the Founder of Myinvestmentideas. He is NISM Certified - Investment Adviser and NISM Certified - Research Analyst. He has been analyzing financial markets in the last 20 years.He can be reached at suresh@myinvestmentideas.com

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