DOMS Industries opens for subscription, GMP up 62%; should you subscribe to the issue?

DOMS Industries IPO: DOMS Industries IPO opens for public subscription today and will close on Friday, December 15, 2023. The bidding for anchor investors concluded on Tuesday, wherein the company collected Rs 537.75 crore. The price band for its public issue at Rs 750-790 per equity share of face value Rs 10 each. At the upper end of the price band, the company’s promoters and shareholders seek to raise Rs 1,200 crore from the IPO. Ahead of the public issue, DOMS Industries shares’ GMP rose 62.66% over the upper end of the share price on offer.

The IPO comprises a fresh issue of 4,430,380 equity shares aggregating up to Rs 350 Crore and Offer-For-Sale (OFS) with promoters offloading 10,759,493 shares aggregating up to Rs 850 crore. The company intends to use the net proceeds from the IPO for proposing to partly finance the cost of establishing a new manufacturing facility to expand its production capabilities for a wide range of writing instruments, watercolour pens, markers, and highlighters. For potential investors, the bidding starts at a minimum of 18 equity shares, with subsequent bids in multiple lots of 18 equity shares each, with a maximum of 14 lots.

Should you apply for the DOMS Industries IPO?

Mehta Equities: Subscribe

“We think the robust multi-channel distribution network and collaboration with FILA has not only brought international quality to Indian consumers but also has given DOMS a global footprint for future growth in the export segment. We expect substantial growth in revenue and profit due to post COVID pent-up demand, and hence we believe the future growth could be seen near to industrial average of 10-12% yoy. On valuation per se at the upper price band of Rs 790/-, based on annualized earnings and fully diluted post-IPO paid-up capital, the issue is asking for a Market Cap of Rs 4794 Cr with P/E of 32.4x on consolidated basis, which seems the issue is fully priced-in discounting medium term growth. In the longer term, we like the company’s commitment towards product quality, innovation and pricing strategy in the segment with a high growth target audience. We also see strong brand presence and multi SKU’s bringing sustainable growth in the long run. Hence, considering all the parameters and market momentum, we recommend investors to ‘Subscribe’ to the issue for listing gains only.”

Choice Broking: Subscribe with Caution

“With around 12% share, Doms is the second largest player in the domestic stationery & art materials market. Over the period, it has developed capabilities to offer quality and attractive products at attractive price levels, which is resulting in improved customer traction towards its products. In the near terms, venture into new revenue verticals (like pens writing instrument and expansion of innovative art stationary products) would be the growth driver. At higher price band, Doms is demanding a P/E multiple of 50x (to its FY23 EPS of Rs. 15.8), which is at significant premium to the peer average. Considering valuation only as a concern, we assign a “Subscribe with Caution” rating for the issue.”

StoxBox: Subscribe

“The company’s remarkable turnaround from losses in FY21 to substantial profits in FY22 has further propelled its financial standing. The company’s asset utilization, as indicated by return on assets (ROA) of 16.1% and an above-average asset turnover of 2.1x for the latest year, is commendable. On the valuation front, the IPO is priced at 30.15x FY24 annualised earnings which we believe is richly valued and sustaining the recent performance on profitability front would be critical in justifying the current valuations. Despite the fully priced P/E, there are notable advantages that DOMS Industries brings to the market, including market leadership, a strong brand presence, established international partnerships, and a foothold in the export market. We, therefore, recommend a ‘Subscribe’ for listing gains rating to the issue.”

(The recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)