IPO NOTE : Flair Writing Industries Limited By Nirmal Bang Ltd
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BACKGROUND
Established in 1976, Flair specializes in manufacturing and distributing writing instruments, which includes pens, stationery items, and calculators. With brands like FLAIR, HAUSER, PIERRE CARDIN and ZOOX, they sold 130 Cr pens in FY23. While it has launched a range of ‘Flair Creative’ instruments in 2021, it has also recently forayed into houseware products such as steel bottles through Flair Writing Equipments Pvt Ltd (FWEPL). They offer a diverse product range for students, professionals, and offices.
Details of the Issue:
* Total issue of ~Rs. 593 Cr (at upper price band) consists of fresh issue worth Rs. 292 Cr and offer for sales worth Rs. 301 Cr
* To utilize an estimated amount of – i) Rs. 55.9cr to set up new plant at Valsad unit; ii) Rs. 86.8cr to fund capex of the company and subsidiary, Flair Writing Equipments Pvt Ltd (FWEPL); iii) Rs. 77 cr to fund working capital requirements of the company and its subsidiaries, FWEPL and Flair Cyrosil Industries Pvt Ltd (FCIPL) and iv) Rs. 43 cr for the Repayment/pre-payment, in part or full, of certain borrowings availed by Flair and their Subsidiaries, FWEPL and FCIPL
Investment Rationale:
* One of the leading player in writing instruments industry in India
* Diversified product portfolio across price points catering to diverse consumer requirements
* Pan-India largest distribution network with a strong presence in targeted markets abroad
* Ability to manufacture a diverse range of high quality products and strong innovation capabilities
* One of the largest exporter of writing and creative instruments in India with its ability to partner with international brands in the industry
Valuation and Recommendation:-
Flair Writing Instruments Ltd is one of the leading company in the industry it operates with a domestic market share of 9%. The company has outperformed industry with a revenue growth at 14% CAGR between FY17-23(industry growth at 5.5%). Flair has delivered a healthy performance in FY23 with 19.5% of operating margin which is best in the industry. Also, ROE and ROCE stood at 27.1% and 30.5% in FY23 which is well above peer performance. The issue is valued at 27x to FY23 EPS which is at discount to its peers. Thus, we recommend SUBSCRIBE to the issue.
Please refer disclaimer at https://www.nirmalbang.com/disclaimer.aspx
SEBI Registration number is INH000001766
