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DOMS Industries Limited IPO entails to raise Rs 1200 crores. The issue is combination of fresh issue of ₹350.00 Cr and OFS of ₹850.00 Cr. DOMS Industries a stationery and art product company primarily engaged in designing, developing, manufacturing, and selling a wide range of products like pencils and mathematical instrument boxes.

About DOMS Industries Limited:

• Their manufacturing operations are primarily undertaken at the Umbergaon Manufacturing Facilities and Jammu Manufacturing Facility. They are solely dependent on Umbergaon Manufacturing Facilities for the manufacturing of ‘stationery and art material’ products. Further, they manufacture ‘wooden slats’ at their Jammu Manufacturing Facility.
• They operate 13 manufacturing facilities across Umbergaon, Gujarat, spread over approximately 34 acres of land covering approximately 1.18 million square feet and is one of the largest stationery manufacturing facilities in India. Their annual installed capacity as on March 31, 2023, for key products was 4,734.93 million units.
• Their domestic distribution network for general trade comprises of over 120 super-stockists, and over 4,000 distributors along with a dedicated sales team of over 500 personnel covering more than 120,000 retail touch points over 3,500 cities and towns.
• The products manufactured by them are sold in over 45 countries globally.
• As of September 30, 2023, they were supported by 8,890 employees which are on payroll and 795 contract labourers.
• In addition, they engage with independent contractors who in turn engage on-site contract labour for performance of certain of their manufacturing operations in India.

Financials: DOMS Industries Limited

Anchor: DOMS IPO

DOMS Industries IPO raised a capital of ₹537.7 crore through an anchor book process on Tuesday, December 12. A total of 55 anchor investors were a part of the anchor book process. This included Goldman Sachs, Theleme India Master Fund, Ashoka Whiteoak Emerging Markets, Abu Dhabi Investment Authority, Optimix Wholesale Global Emerging Markets, Fidelity Funds, and Belgrave Investment Fund etc. Ten domestic mutual funds that have applied through a total of 27 schemes will receive 25,95,960 equity shares, or 38.14% of the total allocation to anchor investors. The mutual funds list included SBI, HDFC, Nippon Life India, ICICI Prudential, Aditya Birla Sun Life Trustee, Axis, Invesco, ICICI Prudential Life Insurance Company, SBI Life Insurance Company, Max Life Insurance Company, Tata Mutual Fund, and Tata AIA Life Insurance Company.

DOMS IPO: Salient Points

• The Indian stationery and art materials market is expected to grow at a CAGR of ~13% during FY 23-28 period to reach a market value of INR 71,600 crore by FY 28.
• DOMS is the fastest growing and 2nd largest player in stationary and related material products.
• The company was promoted by the Rajani family. Later it saw equity participation from FILA of Italy.
• At present the promoters hold 100.00% stake in the company, which will get diluted Post IPO to 74.97%,
• From the Net Proceeds of IPO, they are proposing to part finance the cost of establishing a new manufacturing facility to expand its production capabilities for a wide range of writing instruments, water color pens, markers and highlighters,
• Their top selling product ‘wooden pencils contributed to 31.66% of our total Gross Product Sales in Fiscal 2023 amounting to ₹3,899.88 million and 32.49% of total Gross Product Sales for the six months period ending September 30, 2023 amounting to ₹2524.07 million.

• In the domestic market, they sell products through: (i) general trade which includes selling products to super-stockists who then sell the products to distributors or direct dealers, who in turn sell directly to wholesalers or retailers; (ii) modern trade and e-commerce which includes selling our products through a variety of modern trade platforms such as supermarkets, hypermarkets, minimarkets, cash and carry stores and other leading e-commerce platforms; and (iii) original equipment manufacturers (OEMs) and institutional sales. Their distribution network outside India is further categorised into the following: (i) export sales to the FILA Group; and (ii) third party export sales.
• The table below provides a breakdown of their distribution channels for the periods stated:

• As part of their business strategy, they have in the past made acquisitions or investments in complementary companies, products and technologies as a mode of expanding the operations. In Fiscal 2016, they acquired 49.00% stake in Pioneer Stationery Private Limited (“Pioneer”), a company engaged in the business of manufacturing, selling, marketing and distribution of paper stationery products, for a consideration of ₹21.62 million, with a view to expand business into the ‘paper stationery’ segment and subsequently increased stake in Pioneer to 51.00%.
• Further, in Fiscal 2017, they also acquired 35.00% stake in Uniwrite Pens and Plastics Private Limited (“Uniwrite”), a company engaged in the business of manufacturing, selling, marketing and distributing plastic ball pens, plastic gel pens, and other writing pens and refills, for a consideration of ₹20.00 million with a view to expand into the ‘pens’ segment (with a subsequent increase in stake in Uniwrite to 60%).
• In February 2023, they acquired a minority equity stake of 30.00% in Clapjoy Innovations Private Limited (“Clapjoy”), a company primarily engaged in the business of manufacturing and selling wooden board games, flash cards, puzzles and educational toys for a consideration of ₹15.01 million.
• Further, in August 2023, they acquired majority equity stake of 75.00% in Micro Wood Private Limited, a company engaged in the business of manufacturing of decorative tin boxes and paper packaging products for a consideration of ₹705.60 million.
• Their leadership position in the Indian ‘stationery and art material’ industry with the widest range of products is driving rapid business growth. 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. Their core products such as ‘pencils’ and ‘mathematical instrument boxes’ enjoy a high market share, which were 29% and 30% market share by value in Fiscal 2023 respectively
• They have a wide and differentiated product portfolio, which includes 3,878 SKUs as of September 30, 2023. As per the Technopak Report, they have the widest breadth of product categories amongst our peers in India and are amongst the few ‘stationery and art material’ products manufacturing and marketing companies globally with such product spread.
• Their product offerings having evolved significantly over the past several years,
• Their highest selling product, which is ‘pencils’, contributed only 35.92% of Gross Product Sales, amounting to ₹2,790.07 million in the six months period ended September 30, 2023. They have the least product concentration to overall revenue from the largest product segment among peers in Fiscal 2023.
• The presence across multiple stationery categories and price points has enabled them to be the fastest growing stationery and art material products company in India in terms of revenue during the period from Fiscal 2020 to Fiscal 2023.
• Strong brand recall driven by high quality, innovative and differentiated products; They have been recipients of “The Economic Times Promising Brands 2021” recognition from Economic Times, and “India’s No. 1 Brand Award 2017” from the International Brand Consulting Corporation, USA.
• Robust manufacturing infrastructure, with a focus on backward integration to drive efficiencies
• Strategic partnership with FILA enabling access to global markets and product know-how
• Focused on achieving a greater degree of backward integration of manufacturing processes, which enables to improve efficiency, ensure quality control, reduce dependency on third parties and enhance profitability.
• Peers:

• Doms Industries working capital management, is quite good and looks better than peers. Its outstanding inventory and debtors, put together, are under 3 months of sales.
• IPO is aimed mainly to facilitate a part exit for Italian promoter, FILA which will still be holding a good stake.
• DOMs sales is evenly balanced across all regions in the country.
• Its Pencils, capacity utilization stood at 97% in FY23.
• Company incurred loss in Covid period hence retail portion is 10% only.
• DOMS is the fastest growing and 2nd largest player in stationary and related material products.
• DOMS IPO is coming at a PE ratio of 46x (FY23) and 32x (FY24 annualized ). DOMS IPO is being offered at P/BV of 6.41 based on its post-IPO NAV of Rs. 123.2.
• GMP as reported on social media is Rs. 480. There has been good activity in the grey market.
• I intend to apply in DOMS IPO. Despite the pricing at a good premium, strong backing by Italian promoter, good technical record and both brownfield and greenfield expansion bode well for the company. It also partially carries a MNC tag.
• Do your own diligence please before deciding to subscribe to this IPO.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.