Doms is a leading player in the branded stationary market with a ~12% domestic market share
as per Technopark Report. The Company’s core products such as Pencil & Mathematical
Instruments boxes have a market share of 29% and 30% respectively.
The Company has an international presence in over 45 countries across the globe. However,
the Company’s market share should be greatly credited to its humungous network of 4000
distributors, at over 1.2 Lakh retail touchpoints.
The flagship brand Doms also houses some other brands & sub-brands like C3, Amariz, and
Fixyfix. The brand C3 was designed to cater to the rural markets with affordable polymer-based
pencils instead of the regular wooden ones.
Fixyfix was launched to sell an exclusive range of glue sticks, glitter glues, and fragrance glues.
Amariz was launched to focus exclusively on catering to artistic professionals. It manufactures
professional art brushes and kneadable erasers under this brand.
Due to Doms’ association with the FILA group, Doms also sells its parent’s products in India, Sri
Lanka, Bangladesh, Myanmar & Maldives. The partnership also allows Doms to sell
International brands like DAS, Tratto, Maimeri, Lyra, and a lot more.
Having learned a bit about the Company’s long history & how it is currently managed let’s take a
look at its business segments.
Business Segments
Being a stationery and office supplies brand, the company has a diverse portfolio of products.
However, the domestic stationery business which consists of Pencils, erasers, and sharpeners
brings in 45%-47% of the revenue.
This is followed by Art Materials like Colour Pencils and crayons that bring in 23%-26% of
revenue. Kits & Combos, the combined individual products of the top two segments contribute
to 9%-10% of the revenue.
The stationery and art materials industry deals in a wide range of products from paper products
to writing instruments. The global market was valued at approximately USD 192 billion in CY22.
It is expected to reach a market size of USD 220 billion by CY 27, registering a CAGR of
approximately 2.8%.
Asia Pacific holds the dominant share of the stationery and art materials product market
followed by North America. In 2020, Asia and North America combined captured approximately
60% – 62% of the market for stationery products.
In CY22, the Printing and Writing Paper sector dominated the global stationery and art materials
market with approximately 33% market share, while the Scholastic Stationery sector followed
closely with around 32% share.
The market is at a very developed stage, with extremely slow growth. Along with this,
Digitalization and Environmental concerns over the use of wood remain one of the biggest
concerns for the industry.
Nevertheless, India’s ever-rising literacy rate which allows more & more people to access India’s
education system could fuel the Company’s demand in the coming years.
In FY23, Doms Industries reported revenues of R. 1217 Cr, which increased by 85.38% from
Rs. 656 Cr in FY22. We see that the Company has been constantly scaling revenue growing at
a CAGR of 72.51% from FY21.
Net Profits have increased from Rs. 17 Cr in FY22 to Rs. 103 Cr in FY23, increasing by 5x in a
year. This comes as a result of increasing Operating margins, as a result of Marginal reduction
in Employee expenses as against revenue.
At current earnings, the Company returns a handsome sum to its shareholders. Return on
Equity was at 33.54% and Return on Capital Employed was at 33.31% as of FY23. Debt
remained at 0.28 times Equity.
Key Players in the Market
Given below is the list of competitors to DOMS in the organized market. We see that DOMS has
a significantly less dependence on its top-selling product segment. However, the brand is a lot
dependent on domestic sales as compared to exports.
Strengths of the Company
Partnership with FILA: Doms’ partnership with FILA allows the brand to tap into the Asia Pacific
and Middle East markets. At the same time, Doms can sell FILA’s products in the Indian
Subcontinent.
Leadership in Key Products: The Company has a wide range of products in the Stationary and
art segment, allowing the Company to lead the Indian market, in the pencils & instruments
boxes category.
Strong Brand Value: The Company constantly develops quality products in a diverse variety.
This allows its customers to be trendsetters in the industry.
Robust infrastructure with backward integration: The Company operates 13 facilities across
Gujarat. These facilities house end-to-end operations from conceptualization of design to
distribution. This increases efficiency and reduces operating costs.
Leveraging Technological Infrastructure: Doms uses Salesforce Automation to efficiently track
the performance of its vast sales team. At the same time, the Company uses Distribution
Management Systems to efficiently track & replenish inventory.
Weaknesses of the Company
Volatile Raw Material Prices: The Company’s key component in making a pencil is
polypropylene. This material is used as a lead in the pencil & any change in prices can
significantly impact margins.
Product Concentration: Although the Company has a diverse product line, the Company’s top 2
products accounted for ~60% of FY23 sales. Any downtrend in these products can have a
detrimental impact on the Company’s total sales.
Intense Competition: Despite having garnered a significant market share, the Company remains
at risk of losing this market share over cheaper alternatives by competitors.
Dependence on Promoter: Despite having a formidable share in the domestic market, the
Company’s international presence is majorly dependent on its Corporate Promoter FILA. 59% of
the Company’s total exports were due to its relationship with FILA.
Digitalization: It is probably the biggest threat to the entire industry. The world has been
constantly digitalizing and reducing its exposure to paper & such other supplies.
The shares of Doms Industries Ltd traded at a 57% premium in the grey market on December
7th, 2023. The shares tarded at Rs 1238. This gives it a premium of Rs 448 per share over the
cap price of Rs 790.
IPO Information
Particulars Details
IPO Size Rs. 1200 Cr
Fresh Issue Rs. 350 Cr
Offer for Sale (OFS) Rs. 850 Cr
Opening date 13 December 2023
Closing date 15 December 2023
Face Value Rs. 10
Price Band Rs. 750 - 790
Lot Size 18 Shares
Minimum Lot Size 1 (18 Shares)
Maximum Lot Size 13 (234 Shares)
Min. Investment Rs. 14220
Listing Date 20 December 2023
Promoters: Sanjay Mansukhlal Rajani & Ketan Mansukhlal Rajani as Individual Promoter and
Fabbrica Italiana Lapised Affini S.p.A as Corporate Promoter
Book Running Lead Manager: JM Financial Ltd, BNP Paribas, ICICI Securities Ltd, IIFL
Securities Lts
Registrar to the Offer: Link Intime India Pvt Ltd.
The Objective of the Issue
Rs. 850 Cr or 70% of the Net Proceeds would be used to provide a profitable exit to the
promoters of the Company.
Rs. 350 Cr or 30% of the funds will be raised as a fresh issue in the IPO. These funds will be
used to finance the establishment of yet another manufacturing facility.
Conclusion
Doms Industries entered an already established market in 2005, one with high volume & low
margins and it has built quite a name for itself in these years. However, the business can nearly
double its revenue every year along with maximizing profits.
At the same time, the business maintains returns in the strong 30%+ range. This is a
commendable feat to achieve. Now would this be enough to convince you to invest in a dull
industry at a sky-high valuation of 43x? Let us know in the comments below.
