Flair Writing IPO Allotment Shares; What GMP Signals For Listing On December 1?

Flair Writing Industries, the Mumbai-based stationary products manufacturer, is poised for a healthy listing on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on December 1. Experts predict an impressive debut premium of approximately 25% over the issue price of Rs 304 per share, catapulting the anticipated listing price to around Rs 380 per share.

This optimistic forecast stems from multiple factors, including strong IPO subscription numbers, reasonable valuations, a good financial performance by the writing instruments manufacturer with a diversified product portfolio. Market analysts suggest that bullish sentiment in the market may further amplify the listing gains.

As of today, the Flair IPO grey market premium (GMP) stands at Rs 83, marking a Rs 3 increase from Wednesday's Rs 80. Analysts attribute this rise in grey market sentiments to the buoyant outlook in the Indian stock market and a robust response from investors during the subscription period.

Despite the promising grey market figures, stock market experts caution against relying solely on this non-regulated and speculative indicator to gauge potential listing gains. They emphasize the importance of considering the company's financial fundamentals and advise investors to rely on concrete information from the company's balance sheet.

Flair witnessed a subscription rate of 46.68 times from November 22 to November 24, making it the third most subscribed IPO launched last week. Qualified institutional buyers led the charge, oversubscribing their allotted quota by 115.6 times. High net-worth individuals followed suit with a subscription rate of 33.37 times, while retail investors contributed 13.01 times.

As one of the top three players in India's writing instruments industry, Flair holds a market share of approximately 9% in the overall writing and creative instruments sector. The company recorded net profit growth at a CAGR of 9.9 times during FY21-FY23 and an EBITDA margin increase from 7.7% in FY21 to 21.2% in FY23. The revenue also recorded a noteworthy CAGR of 78% during the same period.

Flair's sound financial health shows well with its net profit margin exceeding 10% and a return on equity surpassing 31.2% in the latest year. Additionally, a robust asset turnover ratio of 1.5 implies above-average asset efficiency.

With a price of 24.9x Q1FY24 P/E (on a diluted & annualized basis) and a market capitalization of Rs 3,200 crore at the upper price band, Flair presents an attractive investment opportunity, especially considering its vertical expansion into houseware products. Analysts believe that this expansion will further boost revenues, leveraging the company's existing large distribution network.

Having mobilized Rs 593 crore through its initial public offering, Flair Writing Industries plans to utilize the net fresh issue proceeds for various purposes, including setting up a manufacturing facility for writing instruments in Valsad, meeting capital expenditure, addressing working capital requirements, repaying debts, and general corporate purposes.