Flair Writing IPO: Should You Invest Or Not Based On Valuation?
Flair Writing IPO plans to raise around Rs 595 crore.
Flair Writing Industries Ltd.'s issue, with a price band of Rs 288-304 per share, will be open for subscription during Nov. 22 to 24.
The initial public offering, which plans to raise around Rs 593 crore, is a combination of fresh issue and an offer-for-sale, aggregating up to Rs 292 crore and Rs 301 crore, respectively.
The company manufactures and distributes writing instruments, including pens, stationery products, and calculators, and has also diversified into manufacturing houseware products and steel bottles.
Ahead of the IPO, the company has mopped up Rs 178 crore from anchor investors.
Proceeds of the fresh issue will be used for setting up a manufacturing facility for writing instruments in Gujarat, funding the company's capital expenditure along with prepay of borrowings.
After the IPO, promoter and promoter group will have 79.21% stake in the company, as compared with 97.49% earlier. Consequently, public shareholding will increase from 2.51% to 20.79%.
Should You Subscribe?
Looking at the valuation at the upper price band, the public issue presents an implied market capitalisation of Rs 3,204 crore, with a price-to-earnings ratio of 24 times.
"Indian writing and creative industry is expected to grow at a CAGR of 7.7%-8.4% over FY23-28 and the steel bottle industry is expected to grow at 14%-16% over FY23-28. Flair is going to benefit from these prospects," said analysts at Ventura Securities, while recommending a 'Subscribe' rating for the IPO.
Faster growth of 14% CAGR as compared with 5.5% for industry for FY17-23, strong dominance in its categories, and being debt-free are the key investment positives for the company, according to Reliance Securities, which has also recommended a 'Subscribe' tag to the issue.
"At higher price band, FWIL is demanding a TTM (trailing 12 months) P/E multiple of 27.1 times, which is at a discount to the peer average of 50.1 times. Thus, we are assigning a 'Subscribe' rating for the issue," said Choice Broking, which expects that improved penetration of other products such as creative stationery items, houseware and steel bottles will further boost the top-line growth for the company.
