DOMS Industries, the second largest pencil-maker and writing instruments player in the Rs 38,000-crore stationery products market, is launching a Rs 1,200 crore Initial Public Offering (IPO) on December 12.
The public issue of the Umbergaon-based firm -- comprising a fresh issue of Rs 350 crore, and an Offer For Sale (OFS) of Rs 850 crore -- will close on December 15.
The issue will see its Italian partner Fila (Fabbrica Italiana Lapis ed Affini), which owns 51 per cent in the firm with an investment of about Rs 300 crore since 2012, selling its stake for about Rs 800 crore.
The promoter family, led by Santosh Rasiklal Raveshia (managing director), Ketan Mansukhlal Rajani (director), Sanjay Mansukhlal Rajani, and Chandni Vijay Somaiya will sell their stake through a mix of OFS and fresh equity worth Rs 400 crore.
After the issue, the promoters will continue to hold 75 per cent and Fila will remain the single-largest shareholder, Managing Director Raveshia told PTI here during a plant visit.
The costal town of Umbergaon in Gujarat's Valsad district is known as the pencil town of the country, as it is home to the two largest players -- Hindustan Pencils, which controls about 40 per cent of the market, and DOMS (30 per cent).
Santosh Raveshia owns 17 per cent in the company, while Sanjay Rajani and Ketan Rajani own 8.63 per cent each, and Chandni Vijay Somaiya, Sejal Santosh Raveshia and Sheetal Hiren Parpani hold 4 per cent each, DOMS Chief Financial Officer Rahul Shah said.
The OFS comprises selling shares worth up to Rs 800 crore by Fila, and Rs 25 crore each by Sanjay Rajani and Ketan Rajani.
The Rs 350-crore raised from the fresh issue will be used to part-fund the new facility planned at Umbergaon -- for which it recently bought 40 acres of land near its present units -- to expand production capabilities for a wide range of writing instruments, such as water colour pens, markers and highlighters, Ketan Rajani said.
Shah said the total capex planned for the new plant is Rs 453.57 crore. In FY23, it had invested Rs 126 crore in capex.
As of March 2023, the domestic writing instrument market was Rs 13,350 crore and is expected to grow 16 per cent annually through FY28 to touch Rs 27,750 crore.
The domestic paper stationery market stood at Rs 16,200 crore in FY23 and is seen growing annually at 12 per cent till FY28 to touch Rs 28,700 crore, according to a Technopak report.
On the need for expansion, Santosh Raveshia told PTI that he expects a significant demand growth and the existing capacity is close to optimal now. The company makes 5.7 million pencils a day, or about 1.7 billion units per annum.
Fila entered DOMS in 2012, picking up 18.5 per cent for Rs 30 crore and then went on to increase the stake to 51 per cent, investing in Rs 294 crore in multiple tranches.
The Milan bourse-listed Fila is into various art materials and stationery products globally. As of December 2022, the company had a revenue of USD 840 million.
DOMS has multiple units in Umbergaon and one unit in Bari Brahma in Jammu. Across these plants, the company employs around 7,800, of whom about 7,400 are in Umbergaon.
Its revenue rose from Rs 683.6 crore in FY22 to Rs 1,212 crore in FY23 while its net income was at Rs 102.9 crore.