DOMS Industries IPO opens today: Should you subscribe to the issue?

DOMS Industries' initial public offering (IPO) is set to open on December 13. The price band for the issue is in the range of Rs 750-790 per share with a lot size of 18 equity shares and its multiples thereafter. The bidding for the three-day issue will close on December 15.

DOMS Industries, incorporated in 2006, is a leading stationery and art product company, specializing in the design, development, manufacturing, and sale of a diverse range of products under the flagship brand, DOMS. The company holds significant market shares of 29 per cent and 30 per cent in pencils and mathematical instrument boxes, respectively, for the financial year 2022-23.

The company aims to raise a total of Rs 1,200 crore via IPO, comprising a fresh share sale of Rs 350 crore and an offer for sale (OFS) of up to Rs 850 crore by its promoter Fabbrica Italiana Lapis ed Affini SPA, Sanjay Mansukhlal Rajani, and Ketan Mansukhlal Rajani.

Also read: DOMS Industries IPO: Grey market premium holds strong ahead of issue opening

The net proceeds raised from the fresh issue will be utilized to partially finance the establishment of a new manufacturing facility, expanding production capabilities for various writing instruments, watercolor pens, markers, and highlighters, as well as for general corporate purposes.

As of March 31, 2023, DOMS Industries has a global presence in over 40 countries, with a robust multi-channel distribution network across the Americas, Africa, Asia Pacific, Europe, and the Middle East. The company has an exclusive distribution and marketing tie-up with select entities of the FILA Group in South Asia.

DOMS Industries raised Rs 537.75 crore via anchor book on Tuesday. Several marquee investors such as Abu Dhabi Investment Authority, Optimix Wholesale Global Emerging Markets, Ashoka Whiteoak Emerging Markets, Fidelity Funds, Goldman Sachs, Theleme India Master Fund, and Belgrave Investment Fund participated in the anchor book.

For the period ending on September 30, 2023, DOMS Industries reported a net profit of Rs 73.91 crore and revenue of Rs 764.22 crore. In the financial year ending March 31, 2023, the company reported a net profit of Rs 102.87 crore and revenue of Rs 1,216.52 crore.

The IPO includes a provision to reserve shares worth Rs 5 crore for eligible employees, who will benefit from a Rs 75 discount per share. Qualified institutional bidders (QIBs) will have a reservation of not less than 75 per cent of the net issue, while non-institutional investors and retail investors will be allocated 15 per cent and 10 per cent of the net issue, respectively.

JM Financial, BNP Paribas, ICICI Securities, and IIFL Securities are the book running lead managers for the DOMS Industries IPO, with Link Intime India appointed for the issue. The company's shares are expected to be listed on both the BSE and NSE exchanges on December 20, Wednesday. Here's what a host of brokerage firms say about the issue:

Reliance Securities
Rating: Subscribe
DOMS has a wide product range with strong market positioning with in house manufacturing, innovative driven R&D activities creating value products for the growing kids and young adults. It has improved its market share by 50 per cent from 8 per cent to 12 per cent in FY23 capitalizing inorganic growth opportunities through expansions and acquisitions, said Reliance Securities.

"The industry is expected to grow at 13.6 per cent with a higher share of branded players improving. We believe DOMS has the widest range of products among its peers, strategic partnership with FILA for product know-how and increasing the exports market share, experienced promoters by a strong professional team are the key investment positives," it added with a 'subscribe' tag.

SBICap Securities
Rating: Subscribe
We believe the company has robust growth potential led by well established distribution network, strong brand recall and well-planned capacity expansion program to cater to the fast-growing demand for branded stationery products, said SBICap Securities. The company has relatively better return ratios compared to peers, it added with a 'subscribe for long term' rating for the issue.

KR Choksey Research
Rating: Subscribe
The company recently entered the European market by introducing its DOMS-branded products in Italy; the high quality of its products could help generate significant sales from European countries for DOMS. At the upper end of the price band, the Company’s P/E is 43.2 times which is higher than the industry average of 36 times, said KR Choksey.

"We believe the premium is justified given the company’s robust market share, established distribution network, expansion of capacities and venturing into new markets, and strong revenue growth and profitability," it added with a subscribe rating for the issue.

Choice Broking
Rating: Subscribe with caution
With around 12 per cent share, DOMS is the second largest player in the domestic stationery & art materials market. Over the period, it has developed capabilities to offer quality and attractive products at attractive price levels, which is resulting in improved customer traction towards its products, said Choice Broking.

"In the near terms, venture into new revenue verticals would be the growth driver. At a higher price band, Doms is demanding a P/E multiple of 50 times, which is at significant premium to the peer average. Considering valuation only as a concern, we assign a 'subscribe with caution' rating for the issue," it added.

Geojit Financial Services
Rating: Subscribe for long term
DOMS maintains a lean balance sheet with a D/E ratio of 0.4 times in FY23. The company intends to utilize the IPO proceeds for expanding its new facility which is expected to add to growth by FY27. EBITDA margins improved to 15.4 per cent and RoCE improved to 25.5 per cent in FY23 driven by enhanced operational efficiency and effective capital utilization, said Geojit.

"Considering its strong brand recall, wide product range, multi-channel pan India distribution network, emphasis on R&D, brownfield and greenfield expansions, higher government spending on education & literacy, and rapid business growth, we assign a 'subscribe' rating on a short-term basis," it said.

Mehta Equities
Rating: Subscribe for listing gains
"We like the company's commitment towards product quality, innovation and pricing strategy in the segment with a high growth target audience in the longer term. We also see strong brand presence and multi-SKU’s bring sustainable growth in the long run," it added while considering all the parameters and market momentum and suggested investors to subscribe for listing gains only.

Ventura Securities
Rating: Subscribe
DOMS Industries' success stems from a strategic emphasis on research and development (R&D), advanced product engineering, and vertically integrated manufacturing processes. This approach, coupled with an extensive multi-channel distribution network across India, has cultivated strong brand recognition among consumers, said Ventura Securities.

"Core products like pencils and mathematical instrument boxes enjoy significant market shares. Their diverse portfolio spans seven categories, offering consumers well-crafted and high-quality stationery and art material across scholastic, paper, office, hobby, craft, and fine art segments," it added with a 'subscribe' rating.

Sushil Finance
Rating: Subscribe for long term
The company has demonstrated rapid growth over FY21 to FY23 in its topline and bottom-line. Growing demand and the company's expansion plan contribute to the company’s strengths. However, the company’s revenue is still concentrated from its wooden pencil business. The market is still heavily competitive with presence of dominant players, said Sushil Finance.

"The general risk of demand reduction and change in the taste, preference, choices of children and parents always remain. Looking at all the factors, risks, opportunities investors may apply for the issue with a medium to long-term view" it added.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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