Bumper Listing: Flair Writing Debuts At 65% Premium; Medium Or Long-Term, What's The Best Bet?

Flair Writing Industries Limited, the Mumbai-based powerhouse in the writing instruments industry made a robust debut on Dalal Street. The company's shares were listed at Rs 501 per share with a premium of 65% over its issue price of Rs 304 per share on the NSE, and on BSE the listing happened at Rs 503 per share, marking a premium of 65.5%.

Even before the listing listing, Flair Writing's shares were creating waves in the grey market, trading at a substantial premium of Rs 136. This early surge in demand highlighted the market's anticipation for the company's debut and signalled positive investor sentiment.

Flair Writing Industries witnessed an exceptional response during its Initial Public Offering (IPO), with the issue being oversubscribed by 49.28 times. The substantial interest came from various investor categories, with qualified institutional bidders (QIBs) leading the pack at 122.02 times subscription. Non-institutional investors (NIIs) also showed significant interest, subscribing at a rate of 35.23 times, while retail investors booked their shares 13.73 times.

The issue, with a price band of Rs 288-304 per share, attracted investors bidding for 49 equity shares in one lot and multiples thereafter, ultimately raising Rs 593 crore through the IPO route. The allocation included Rs 292 crore from the fresh issue of equity shares, while an offer-for-sale (OFS) raised Rs 301 crore by selling shareholders.

Flair Writing Industries has outlined strategic plans for the use of the IPO proceeds, earmarking Rs 292 crore for setting up a manufacturing facility for writing instruments in Valsad district, Gujarat. The funds will also support the company's capital expenditure and its subsidiary, Flair Writing Equipments Pvt Ltd (FWEPL).

In addition, the raised capital will play a pivotal role in meeting the working capital requirements of Flair Writing and its subsidiaries, FWEPL and Flair Cyrosil Industries. A portion of the funds will be directed towards the repayment of loans and general corporate purposes, positioning the company for sustained growth.

Flair Writing has solidified its position as one of the top three players in the overall writing instruments industry, boasting a market share of approximately 9% in the writing and creative instruments sector in India as of March 31, 2023, according to CRISIL.

The company has not only maintained its stronghold but has also outpaced industry growth. While the writing and creative instrument industry grew at a compounded annual growth rate (CAGR) of 5.5% between FY17 and FY23, Flair Writing achieved a CAGR of approximately 14% during the same period.

CRISIL highlighted the company's outstanding financial performance in FY22, reporting the highest operating and net income margins of 17.8% and 9.6%, respectively, among key players in the writing instruments market.

Market expert, Parth Shah, Research Analyst at StoxBox, commends Flair's remarkable market performance and positions it as a promising investment for the future. "Surpassing our expectations, the Flair Writing Industries IPO listed at a robust 65% premium on the bourses today and is currently trading about 49% higher than its issue price of Rs. 304 per share.

Along with the feat of being amongst the top three players in the overall writing instruments industry, Flair's rapid revenue growth along with the geometric expansion in demand is a testament to its successful market penetration and responsiveness to increased demand, particularly in the school sector," he said.

Shah notes that the company's net profit margin exceeding 10% reflects its robust financial health, and the Return on Equity (RoE) surpassing 31.2% underscores efficient capital utilization. The asset turnover ratio of 1.5 implies above-average asset efficiency.