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Leading player in the writing instruments: Flair Writing is among the top 3 players in the overall writing instruments industry in India with a market share of ~ 9% as of FY23. It is largest player in the pens segment (82% of FY23 revenue) in India with biggest distribution network. Organized players form 80% of the industry and Flair is among Top-2 of them with revenue growing faster at 14% CAGR over FY17-23 vs 5.5% for market. The Indian writing & creative instruments industry is expected to grow at 8% over FY23-28E to ?200bn.

Largest pan-India distributor & Strong Presence Globally: As of 1QFY24, it had largest pan-India network of ~7,754 distributors/dealers and ~315,000 wholesales/retailers. Further, Flair is of the largest exporter of writing and creative instruments in India and has 7% market share as of FY23. Exports contribute ~20% to revenues.

Foray into newer category: Flair recently forayed into manufacturing a wide range of houseware products –bottles, storage containers, cleaning solutions, etc. It intends to leverage the strength of the “Flair” brand and their manufacturing and distribution capabilities to expand the new segment, which is expected to be a key area of their growth going forward given the steel bottle industry in India is projected to grow at a CAGR of 14-16% between FY23- 28.

Financials: Flair has witnessed robust growth in its financial performance with revenue/ PAT CAGR of 78%/9.9x over FY21-23. Its EBITDA margin improved sharply from 7.7% in FY21 to 21.2% in 1QFY24. It has capacity of 200cr pens annually which post expansion will increase to 235cr pens. Its return ratios are healthy with RoE/RoCE of 20%/36% post dilution

Issue Size: ?5.9bn IPO consists of Fresh Issue of 9.6mn shares and OFS of 9.9mn shares by promoters. The funds raised will be utilized for capital expenditure, debt repayment and funding of working capital requirement. The market cap post listing would stand at ?32bn.

View: Flair Writing is a frontrunner in the market with consistent healthy financial performance. Its vertical expansion into houseware products would further boost its revenues benefitting from its existing large distribution network. The stock is priced at 24.9x 1QFY24 P/E (on diluted & annualized basis) which is discount to its peers. Hence, we recommend Subscribe. Given the strong brand name, pan-India presence, robust financials and expansion plans, it makes Flair a compelling proposition.

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