Flair Writing Industries Limited IPO

About the company:

Incorporated in 1976, Flair Writing Industries Limited (FWIL) is engaged in developing and manufacturing writing instruments that are tailored to today's continuously shifting market. The company owns, manufactures, and distributes several brands including Flair, Hauser, Pierre Cardin, Flair Creative, Flair Houseware, and the Zoox. Its 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. It has recently forayed into manufacturing a wide range of houseware products including casseroles, bottles, storage containers, serving solutions, cleaning solutions, baskets, and paper bins, through one of its Subsidiaries, FWEPL. It intends to utilize a portion of the proceeds from the Offer for funding capital expenditure of FWEPL for the purchase of machinery and moulds to expand its manufacturing capacity for writing instruments. FLAIR has established business relationships with some of the leading pioneers in the writing industry, and due to its ability to manufacture quality products and its distribution and retail capabilities, the company has been able to partner with various international brands in the writing instruments industry.

The Objective Of The Fresh Issue:

The company intends to utilize the net proceeds received from the fresh issue towards:
Setting up a new manufacturing facility for writing instruments in Valsad (Gujarat).
- Funding capital expenditure of the Company and its Subsidiary, FWEPL.
- Funding working capital requirements of the Company and its Subsidiaries, FWEPL and FCIPL.
- Repayment of certain borrowings availed by the Company and its Subsidiaries, FWEPL and FCIPL.
- General corporate purposes.

Key Strengths and Opportunities:

- FWIL is the largest player in the pens segment in India reporting a revenue of Rs. 7,542 million in FY 2023 from the pens writing instruments segment. It is among the top three players in the overall writing instruments industry, and occupies a market share of approximately 9% in the overall writing and creative instruments industry in India, as of March 31, 2023.

- Flair has an established track record of strong financials with consistent year-on-year growth across major financial metrics including revenues, PAT, and EBITDA.

- The company has a diversified range of products across various price points catering to a wide spectrum of consumers. It has the most comprehensive product portfolio in the writing and creative instruments industry in India. In order to enhance the brand presence in terms of product pricing, it focuses on competitive pricing and aggressive marketing for its mass segment, and on brand building and product differentiation for its mid-premium and premium segment.

- Flair intends to leverage its leading position as an award-winning exporter of writing instruments from India to increase penetration in existing markets abroad by expanding the distribution network, and to enter new markets. It has established long-term relationships with international companies either as a manufacturer, distributor, or contract manufacturer.

Risks:

- The company’s success depends on its ability to respond and adapt to consumer needs and maintain an optimal product mix in terms of production volumes and profitability in the writing instruments industry. Any inability to successfully implement the business plan and growth strategy or effectively manage its growth could lead to a decline in the demand for its products and have a material adverse effect on our business, operations, prospects, or financial results.

- The company derives a significant portion of its revenue from the sale of products under the “Flair”, “Hauser” and “Pierre Cardin” brands, and any harm to such brands or reputation may adversely affect its business, financial condition, cash flows, and results of operations.

- Flair is dependent on its distribution network in India and overseas to sell the products and any disruption in the distribution network could have a material adverse effect on the company’s business, operations, prospects, or financial results.

- The company operates in a competitive business environment. Competition from existing players and new entrants in the industry could have a material adverse effect on its business, prospects, operations, or financial results.

Financial Snapshot:

Conclusion:

FWIL is one of the leading players in writing instruments and stationery. The company has a robust revenue, EBITDA, and PAT growth. Flair comes at an earnings valuation of 24x based on its earnings per share (EPS) as of March 31, 2023, and the upper price band. In comparison, its listed peers, such as Cello World, Kokuyo Camlin, and Linc Limited, exhibit PE ratios of 63x, 37x, and 26x respectively as of November 17, 2023. Given these factors, we advise our investors to consider subscribing to the Flair Writing Industries Limited IPO solely for potential listing gains.

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