Flair Writing Industries IPO Review

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Flair Writing Industries IPO

7.7

Company Background

8.0/10

Price Band

7.0/10

Financial Health

8.0/10

Industry Situation

7.5/10

IPO Proceeds Usage

8.0/10

Pros

  • Well Established Brand
  • Wide Range of Price Points
  • Strong Market Penetration
  • Consistent Financials

Cons

  • Market Disruption Risk
  • Competitive Space

Flair Writing Industries Limited Basic Details

Before we begin our review on Flair Writing Industries IPO, here is a quick summary for you:

 

Flair Writing Industries Limited Background

The company is engaged in the manufacturing of writing instruments in India. The main focus of the company’s operations is on pens which contribute up to 75 per cent of domestic writing instruments industry in India.

The products of the company and sold under brands “Flair”, “Hauser”, “Pierre Cardin”, “Rudi Keller” and “Landmark“. The company is the exclusive distributor of certain Reynolds branded pens in India since January 2017.

The company’s product range is quite extensive and offers 658 different products in pen products stationery and calculators. The company has 6 manufacturing plants in Maharashtra, Daman and Diu and Uttarakhand.

The company has a huge sales and distribution network including 100 super stockists, 50 International distributors, etc.

Flair Writing is now going to launch an Initial public offering or IPO very soon in the range of ₹450 Crore. In this detailed Flair Writing Industries IPO review, we will talk about different aspects related to this IPO such as background information, financial health, IPO events, risks and strengths of the company.

Hopefully, by the end of the review, you will be able to take a decision on whether to go ahead with this IPO or not.

Flair Writing Industries Limited Management Information

Currently, there are 10 Directors on the Board of Flair Writing Industries Limited.

Mr Khubilal Jugraj Rathod is the Chairman of the company. He possesses an experience of more than 4 decades in the writing instruments industry. He has received several awards including the Lifetime Achievement Award and the Udyog Rattan Award from the Institute of Economic Studies.

Flair Writing Industries IPO Data Points

Flair Writing Industries IPO will open on (undisclosed) and close for subscription on (undisclosed).

The IPO size will be of (undisclosed) lakh Equity shares and the face value of each share will be ₹10. The price band has been set at ₹(undisclosed) – ₹(undisclosed) per equity share.

The offer price includes a premium of ₹(undisclosed) and is (undisclosed) times the face value of the equity shares. The IPO size is expected to be up to ₹450 crores.

The offer consists of a fresh issue of:

  • Up to (undisclosed) lakh equity shares aggregating up to ₹330 crores and
  • An offer for sale of up to (undisclosed) lakh equity shares by selling shareholders, aggregating up to ₹120 crores. The offer for sale includes equity shares being offered by:
    • Mr Khubilal Jugraj Rathod, aggregating up to ₹24 crores,
    • Mr Vimalchand Jugraj Rathod aggregating up to ₹18 crores,
    • Mrs Nirmala Khubilal Rathod, aggregating up to ₹12 crores,
    • Mrs Manjula Vimalchand Rathod, aggregating up to ₹12 crores,
    • Mr Rajesh Khubilal Rathod, aggregating up to ₹12 crores,
    • Mr Mohit Khubilal Rathod, aggregating up to ₹12 crores,
    • Mr Sumitkumar Vimalchand Rathod, aggregating up to ₹12 crores,
    • Mrs Sangita Rajesh Rathod, aggregating up to ₹6 crores,
    • Mrs Shalini Mohit Rathod, aggregating up to ₹6 crores,
    • Mrs Sonal Sumitkumar Rathod, aggregating up to ₹6 crores.

The market lot size is of (undisclosed) equity shares and the shares will be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Pursuant to a resolution passed on August 16, 2018, the fresh issue has been authorised by the Board of Directors and pursuant to a special resolution of the selling shareholders dated August 24, 2018, the offer has been approved by them.

Flair Writing Industries Limited Financial Performance (Restated Consolidated)

Total revenues of the company have been increasing gradually over the last 5 years.

 

The growth has been from ₹270.6 crores in fiscal 2014 to ₹580.67 crores in fiscal 2018. Although, the same trend cannot be seen in profits after tax.

Here is the revenue growth pattern in the last 5 years:

PAT or Profit After Tax has decreased to Rs. 49.26 crores in fiscal 2018 from Rs. 52.68 crores in fiscal 2016.

This is how the profit has panned out over the last few years:

From 2014 to 2018, the company showed a CAGR of 21.03% and 15.26% growth in total revenues and PAT respectively.

The return on net worth of the company for the years ended March 31, 2018, March 31, 2017, is 35.01% and 139.9% respectively. The net asset value per equity share of the company as on March 31, 2018, is ₹65.85.

Flair Writing Industries IPO Objectives

The Flair Writing Industries IPO consists of two parts:

The proceeds from the offer for sale of equity shares will be given to the selling shareholders. Any proceeds from the offer for sale will not be received by the company for its operations.

The main objectives of the fresh issue of equity shares are as follows:

  • For buying machinery
  • For meeting expenses related to the construction of new factory buildings and related facilities at manufacturing plant in Valsad, Gujarat
  • For funding of the working capital requirements of the company
  • For repayment or prepayment of loans taken by the company from banks and financial institutions
  • For meeting expenses related to the general corporate operations.

Other than the above-mentioned objectives, the company will also benefit in terms of enhanced corporate image, brand name and increased visibility through Flair Writing Industries IPO.

Flair Writing Industries IPO Events

In case you wish to invest in this IPO, it would be better off if you are aware of the specific dates on which different events such as IPO opening/closing, lot remittance etc are going to happen.

Here is a quick summary for your reference:

Filing of Draft Red Herring Prospectus (DRHP) September 24, 2018
Anchor List TBA
IPO Open Date TBA
IPO Close Date TBA
Finalization of Basis of Allotment TBA
Credit to Demat Accounts TBA
Listing at BSE and NSE TBA

 

Flair Writing Industries IPO Recommendation

Now, let us discuss different strengths and risks related to the business of Flair Writing Industries before you finally make up your mind on whether to invest in Flair Writing Industries IPO or not.

One of the biggest strengths of the company is their well-established brands catering to different consumer segments. ibrands360 recognised Flair as one of Asia’s most promising brands.

Another competitive strength of the company is the price range of their products which cater to almost every kind of consumer in India.

Market penetration of the company is great because of its extensive sales and distribution network comprising of more than 7250 distributors and around 2,50,000 wholesalers and retailers.

The company also shares a good relationship with international companies for which they manufacture and distribute products. The company also possesses a huge capacity and well equipped manufacturing facilities.

Let us now come to the risks related to the business of the company.

The future performance of the company depends on their ability to respond to consumer preferences. Thus, understanding the dynamic needs and requirements of the consumer is one of the biggest keys for survival and growth in the industry.

The company is exposed to the risk of disruption in its distribution network which could adversely affect the operations and profitability of the company.

Inability to maintain the brand image and presence in the country may have a negative impact on the future performance of the company.

Special Purpose Restated Financial Information that is a part of the Draft Red Herring prospectus of the company may be based on assumptions which do not reflect the historical financial performance of Flair Industries. This is also possible that these statements cannot be used for comparison with future financial statements.

The company is exposed to the risk of inability to accurately forecast demand for their products and not being able to manage their inventory efficiently and effectively.

The industry in which this company operates is highly competitive and faces severe competition from local as well as international players.

The company, its group companies, promoters, Directors, etc. are involved in certain legal proceedings pending at different levels and any adverse ruling in them may pose a risk to the overall profitability of the company.

The company’s dependence on just a few geographic areas for exports is another risk factor for its revenues. Any failure in obtaining, renewing or retaining necessary permits, licenses, etc. may adversely affect the financial health of the company.

The working capital of the company may be adversely affected by delays in payments from their customers which may further affect the smooth functioning of the company. The company is also exposed to the risk of foreign exchange fluctuation.


After analysing different aspects of the company including financial performance, strategies for future growth, other strengths and risks of the business, it can be said that investors may choose to subscribe to the Flair Writing Industries IPO.

The IPO is certainly going to bring you returns from the long-term perspective, although there might be mild returns in short term as well.


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Flair Writing Industries IPO Advisors Information

Axis Capital Limited and Edelweiss Financial Services Limited are acting as Book Running Lead Manager to the issue. Link Intime India Private Limited is acting as the Registrar for the Flair Writing Industries IPO.

S&R Associates is acting as legal advisor to Flair Writing Industries as to Indian law. Trilegal is acting as legal advisor to the underwriters as to Indian law. Duane Morris & Selvam LLP is acting as a special international legal advisor to the book running lead managers.

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