FLAIR WRITING INDUSTRIES LIMITED IPO: ALL YOU NEED TO KNOW

The fourth IPO that opens for subscription this week is Flair Writing Industries Limited (FWIL). The company operates in the highly competitive Indian writing instruments industry. It operates in the mass-market segment where writing instruments are sold at prices up to Rs 15, and companies generally find it difficult to increase the prices of products targeted at students. 

FWIL opens for subscription on the 22nd and closes on the 24th of November. In this article, we will look at the various aspects related to the company. It will help you decide whether to subscribe or invest in the IPO for the long term. 

Flair Writing Industries IPO: Key Details

Below are the key details related to the FWIL IPO:

• Issue Size: Rs 593 crore
• Price Band: Rs 288 - Rs 304
• Issue Details: Fresh Issue of Rs 292 crore + Rs 301 crore Offer For Sale (OFS)
• Market Cap: At the upper price band, Rs 3,204 crore
• Minimum Investment: Rs 14,896

Flair Writing Industries IPO: About the business

Flair Writing Industries Limited was incorporated on August 12, 2016. Flair is among the Top players in the overall writing instruments industry for FY23 and occupies a market share of approximately 9% in the overall writing and creative instruments industry in India (FY23).

According to CRISIL, they are also among the top two organized players, which have seen faster growth in revenue as compared to the overall writing and creative instrument industry growth rate. The industry grew at a compounded annual growth rate of 5.5% between FY17 and FY23, and FWIL grew at a CAGR of approximately 14% during the same period. 

Their flagship brand “Flair” has enjoyed a market presence of over 45 years. The company has an extensive range of products across various price points and caters to a broad range of consumers, including students, professionals, and offices. They manufacture and distribute writing instruments, including pens, stationery products, and calculators.

Leveraging on their manufacturing capabilities, and existing customer base in the writing and creative instruments business, the company has also diversified into manufacturing houseware products and steel bottles.

The company manufactures and distributes several brands in India, and due to their ability to manufacture quality products and distribution and retail capabilities, they can partner with various international brands in the writing instruments industry. 

Flair Writing Industries IPO: Industry Overview

The writing and creative instruments industry in India has experienced consistent growth between FY18 to FY20, driven by product innovation, design modifications, brand development by leading players, and high demand. The industry has witnessed a shift in its structure, with large organized players gaining market share over unorganized, smaller players. Large, organized players have been able to grow faster than the industry average by diversifying their product portfolios and expanding distribution channels. 

However, in FY21, due to the COVID-19 pandemic, there was a closure of schools and institutions, resulting in a subdued demand for products, leading to a 39% decline. As offices reopened and schools restarted, the industry started witnessing a pick-up in demand in FY22, with industry surpassing pre-pandemic levels, in FY23. Overall, the industry expanded at a CAGR of 38.3% between FY21 and FY23. The Indian writing and creative instruments industry is to grow at 7.7 – 8.4% CAGR over FY23 – FY28.

The Indian writing and creative instruments industry has many small, unorganized players, and organized players. The smaller players typically offer low-value products and operate in specific geographies. Organized players, on the other hand, have wider product portfolios, a pan-India presence, and multiple manufacturing facilities. Organized segment to log 8.5 to 9.0% CAGR between FY23 and FY28.

Flair Writing Industries IPO: Listed Peers

The company faces tough competition from listed and unlisted peers. In the listed space, they only have three companies - Linc Limited, Kokuyo Camlin Ltd, and Cello World (it got listed recently). Let us look at the financials of FWIL and listed peers to get an idea of where the company stands against its peers. We will compare the crucial parameters for FY23. Here is the comparison:

• In terms of revenue, Cello World is the largest player. It is followed by Flair Writing Industries (nearly 50% revenue) and Kokuyo Camlin.
• The earnings per share (EPS) is highest for Linc, followed by Cello World and FWIL.
• In terms of Return on Net Worth (RoNW), Flair tops the table, followed by Linc and Cello World.
• Excluding Cello World (data unavailable), FWIL has the highest number of distributors and wholesalers. However, the working capital cycle is highest for FWIL among the three players.

Flair Writing Industries IPO: Financials

Let us now look at the most crucial part that one needs to consider while evaluating a new company. Below are the financial numbers of FWIL over the last three financial years:

• The company has reported a revenue of Rs 297.99 crore, Rs 577.40 crore, and Rs 942.66 crore for FY21, FY22, and FY23, respectively. Revenue has grown at an exceptional 77.89% CAGR in this period. The revenue for Q1FY24 was Rs 246.70 crore.
• The revenue from the top 5 customers as a percentage of total revenue for FY21, FY22, and FY23 was 25.31%, 29.36%, and 21.32%, respectively.
• FWIL has reported an EBITDA of Rs 23.00 crore, Rs 97.57 crore, and Rs 183.51 crore for FY21, FY22, and FY23, respectively. EBITDA margins for the same period were 7.72%, 16.90%, and 19.47%, respectively. The margins have improved significantly YoY in this period.
• They have reported a net profit of Rs 0.99 crore, Rs 55.15, and Rs 118.10 crore for FY21, FY22, and FY23. The bottomline has grown at a tremendous rate in this period because of margin improvement. The trend continued in Q1FY24 when the company reported a PAT of Rs 32.14 crore.
• For the last three financial years, FWIL the company has reported an average EPS of Rs 8.32 and an average RoNW of 21.94%.  
• If we annualized FY24 earnings and attribute it to the post-IPO paid-up equity capital of the company, then the asking price is at a P/E of 24.92.
• Return on Capital Employed (ROCE) for FY22 and FY23 was 17.41% and 31.24%, respectively. ROE for the same period was 18.87% and 31.17%, respectively.
• The debt-to-equity ratio has fallen in recent years. It has fallen from 0.36 in FY22 to 0.26 in FY23.