Doms Plans IPO Worth Rs. 1,200 Crore
Mumbai: DOMS Industries, India’s second-largest pencil manufacturer, is gearing up to file draft papers for an initial public offering (IPO) valued at ₹1,200 crore with the Securities and Exchange Board of India (SEBI) in the second week of August, as confirmed by two investment bankers familiar with the matter.
Italy’s F.I.L.A. Group, the majority stakeholder with 51% ownership in DOMS, intends to offer shares worth ₹800 crore in the IPO. The company’s Indian promoters comprise the renowned Raveshia and Rajani families.
The raised funds will be utilized to establish a state-of-the-art, single-location manufacturing facility in the stationery industry, positioned in the Asia Pacific region. An impressive capital expenditure of ₹800 crore has been allocated for this expansion project, which is scheduled to be carried out between FY23 and FY28, as stated by one of the investment bankers. The investment objectives encompass the transition of the current plant from leased to owned facilities, boosting production capacities, setting up plants for innovative products, and modernizing older machinery.
Leading financial institutions, namely JM Financial Ltd, ICICI Securities Ltd, IIFL Capital Ltd, and BNP Paribas, have been appointed as the bankers for this IPO.
DOMS will be the second company in the stationery industry to file for an IPO recently, following pen-maker Flair Writing Industries Ltd, which filed preliminary papers with SEBI to raise ₹745 crore through an IPO earlier this month.
The stationery market has experienced a significant surge in the aftermath of the covid-19 pandemic, evident from DOMS Industries’ impressive revenue growth of 77%, culminating in a revenue of ₹1,212 crore in FY23 compared to ₹683 crore in FY22. This remarkable growth is attributed to the strong demand for their pencil segment, leading to a substantial volume increase of over 59%.
A Crisil report highlights that DOMS’ revenue growth has resulted in better-fixed cost absorption, enabling the company to increase prices and achieve an estimated operating margin of over 15% for FY23.
Currently boasting a production capacity of 6.5 million pencils per day, DOMS ranks as the second-largest player in the market, only behind Hindustan Pencils Pvt. Ltd, the manufacturer of Natraj and Apsara pencils.
In a strategic move to diversify its presence into new segments, DOMS acquired a 30% stake in toy maker Clapjoy earlier this year.
With a widespread network comprising over 100 super stockists, 3,500 dealers or distributors, and more than 100,000 wholesalers and retailers, DOMS serves customers through its two renowned brands, DOMS and C3, catering to both premium and economy segments.
Crisil reports that DOMS maintains a comfortable capital structure with robust debt protection metrics. Its prudent approach towards external debt utilization for working capital and capex needs has resulted in a healthy total outside liabilities to adjusted net worth (TOLANW) ratio of 0.86 times, based on an estimated net worth above ₹340 crore as of 31 March 2023. Additionally, its debt protection metrics are impressive, with an interest coverage ratio and net cash accruals to adjusted debt estimated above 15 and 1.35 times, respectively.
In FY23, DOMS projects cash accruals surpassing ₹130 crore, with cash and cash equivalents amounting to ₹40 crore as of 31 March 2023. The company is anticipated to generate cash accruals of over ₹160 crore over the medium term. Furthermore, it has access to fund-based limits of ₹67 crore, with an average utilization of 37% over the 12 months ended March 2023. Crisil Ratings provides assurance that the group possesses adequate accruals and cash reserves to meet term debt repayment, partially finance its capex requirements, and cater to incremental working capital needs in the coming year.
About Doms:
Doms Industries Private Limited is a prominent manufacturer of stationery products, catering to a global customer base. The company’s diverse range includes wooden graphite and colored pencils, wax crayons, erasers, sharpeners, plastic scales, glitters, geometry boxes, and pens. Their brand, Writefine Products, is renowned for serving customers worldwide.
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