Child’s Play: High recall and dominant position add to Doms’ appeal

• Doms has 12% market share in India’s branded stationery and art material market.
• Recently listed stationery players Flair and Cello World gave good listing gains.
• The grey market expects 61% listing gains from Doms.
  

Few school-going children and their parents would be unaware of Doms. The high recall value and its dominant market position will help the ₹1,200 crore public offer is expected to sail through easily, say experts.

Stationery makers Flair and Cello World recently made their successful market debuts providing 49% and 22% listing gains respectively. The IPO of Doms, India’s second largest branded stationery and art products maker, will only be better, say experts.

“Neither of them are in a dominant position in the market. Doms in a different league altogether. Its distribution is good, and has shown a phenomenal growth since the Covid pandemic and its fundamentals are in place,” Arun Kejriwal, founder at Kejriwal Research & Investment Services, tells Business Insider India.

A wide range of products

The company sells scholastic stationery, art material, paper stationery, office supplies and more. It had around 12% market share in branded stationery and art materials market in FY23. Its core products such as pencils and ‘mathematical instrument boxes’ enjoy 29% and 30% market share by value in FY23.

“They have the widest breadth of product categories amongst their peers in India. Their presence across multiple categories and price points has enabled them to be the fastest growing such company in terms of revenue,” said a report by Anand Rathi which gives it a ‘subscribe for long-term’ rating. Its listed peers in the market are Kokuyo Camlin, Linc and Pidilite Industries.

Kejriwal too says that the company is focussed on growth. “Based on interactions with the management, they seem focussed on growing volumes and expanding the business,” he adds.

The grey market too is placing its bets on the company, as it expects 61% listing gains from the stock. Experts say that this is because only 10% of the offer is earmarked for retail investors, and a lot of people are expected to apply for the issue.

The issue will open on December 13 and close on December 15, and has fixed a price band of ₹750-790 per share.

The post-Covid turnaround

The company posted losses in FY21 due to Covid-19 related lockdown, which resulted in the closure of domestic and export markets, especially educational institutions, offices and workplaces and retail outlets.

Ever since, however, it has shown a steady growth. Its revenue from operations grew at a CAGR of 73.45% from FY21 to FY23. Its EBITDA margin more than doubled from 7.45% to 15.4% over FY21 to FY23, the company said in its DRHP.

Source: DRHP

A wide distribution

Doms operates 14 manufacturing facilities in Gujarat and Bari Brahma in Jammu and Kashmir. It intends to use the net proceeds from the fresh issue to set-up a new manufacturing facility in addition to general corporate purposes.

It also has a wide reach and a strong domestic distribution network of over 120 super-stockists, and 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.

It is also expanding internationally and has forged a joint venture with Italian multinational company FILA. It gives them access to international markets, and also augments their R&D and technological capabilities.

“Their symbiotic association with FILA, based on mutual synergies, has resulted in expansion of their international footprint in key American and European markets and has helped in the global distribution of ‘Doms’ brand,” said a report by Axis Capital.

They also have an exclusive tie-up with certain entities of the FILA Group, for distribution and marketing for all categories of their respective products, under their name and trademark, in India, Nepal, Bhutan, Sri Lanka, Bangladesh, Myanmar, and Maldives.

Rooted firmly in its home market, it’s eyeing exports with a focus on backward integration to drive efficiencies. All of it makes Doms a long-term bet, say analysts.

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