Flair Writing Industries Ltd, which manufactures and exports writing instruments, has filed its draft red herring prospectus with the Securities and Exchange Board of India (SEBI) to float an initial public offering (IPO) that would result in the Mumbai-based firm becoming the highest-valued non-paper listed stationery company in India.
Flair Writing will issue fresh shares worth Rs 330 crore besides a secondary market sale of shares worth Rs 120 crore by the promoters and promoter group.
The company may separately raise Rs 50 crore through a pre-IPO round and subsequently revise the fresh shares component.
The initial share sale will result in roughly 20-23% stake dilution on a post-IPO basis after taking into account the fresh sale. This may value Mumbai-based Flair at Rs 2,000 crore ($275 million), VCCircle estimates show.
Peer firms Kokuyo Camlin Ltd - formerly Camlin and now majority-owned by Japanese company Kokuyo - commands a market capitalisation of Rs 1,300 crore on the Bombay Stock Exchange.
Kolkata-based Linc Pen & Plastics Ltd has a market value of Rs 440 crore, stock-exchange data shows.
Here’s a snapshot of the proposed IPO by Flair Writing Industries.
Issue
The IPO size is Rs 450 crore ($62 million at current exchange rates), according to the DRHP filing.
The IPO will comprise of fresh shares worth Rs 330 crore and promoters and promoter group equity worth Rs 120 crore.
The company may separately raise Rs 50 crore through a pre-IPO round and revise the fresh shares’ component.
The initial share sale will result in 20-23% stake dilution on a post-IPO basis. This may value Mumbai-based Flair at Rs 2,000 crore ($275 million), VCCircle estimates show.
Use of proceeds
Flair aims to use Rs 132.88 crore to purchase machinery.
It intends to use Rs 69.5 crore for constructing new factory buildings and related facilities at its Valsad (Gujarat) plant, Rs 40.49 crore as working capital, Rs 15 crore for advance payment or repayment of certain debt, and the rest of the amount raised from fresh shares for general corporate purposes.
Bankers
Axis Capital and Edelweiss Financial Services are merchant bankers managing the IPO.
Lawyers
S&R Associates will represent the company.
Trilegal and Duane Morris & Selvam LLP are, respectively, Flair’s Indian and international representatives to merchant bankers and underwriters.
Company
Flair was originally established as a partnership in January 1986 before being incorporated into a private company in August 2016.
It is a leading manufacturer of writing instruments in India, with a focus on pens, a segment that accounts for 70-75% of the domestic writing instruments industry in India in value terms.
The company, promoted by Khubilal Jugraj Rathod and Vimalchand Jugraj Rathod, offers a range of products such as pen products and non-paper stationery such as mechanical pencils, highlighters, correction pens, markers and gel crayons, and calculators. In all, it offered 658 products as of June-end 2018.
The company introduced the Flair brand of pens in 1976. It now sells its products under principal brands Flair, Hauser and Pierre Cardin, as well as other brands Rudi Kellner and Landmark.
The company has also been exclusively making and distributing Reynolds brand of pens since early 2017.
The firm has exclusive rights to the Pierre Cardin trademark in India for products, including pens. It is also a distributor of Zig pens in India, besides a contract manufacturer.
Flair has six plants in Maharashtra, Daman and Diu and Uttarakhand. Its seventh plant in Valsad has been partially operational since July 2018 and is partly under-construction.
The firm operated through a network of over 7,250 distributors and nearly 250,000 wholesalers as well as retailers as on June-end 2018.
Financials
The company reported a net profit of Rs 50 crore for the financial year 2017-18 on revenue (from operations) of Rs 573.59 crore.
Its net profit was Rs 24.6 crore for 2016-17 on revenue of Rs 150.35 crore.
