DOMS Industries IPO likely to see strong listing gains but analysts caution fresh buyers

However, once it is listed, some caution is warranted as valuation will likely become expensive.

Analysts and the investor community are expecting a strong listing of DOMS Industries on December 20 thanks to an impressive financial track record in the last three years.

The grey market premium (GMP) of the stock stands at Rs 495 – a massive 62 percent above the issue price of Rs 790. The GMP is the premium at which the stock trades in an unofficial unlisted market and indicates demand for a security.

“DOMS Industries. IPO received a strong oversubscription and we expect a positive listing for the issue. We expect the stock to list at a premium of around 65 percent to the issue,” said Dhruv Mudaraddi, Research Analyst, Stoxbox.

“We believe the strong listing can be attributed to DOMS Industries’ commendable performance over the past three years, marked by significant growth in revenue and profitability. The company's remarkable turnaround from losses in FY21 to substantial profits in FY22 has further propelled its financial standing,” Mudaraddi said.

The stationery and art products maker that gets 70 percent of its business from scholastic stationery and art material segments raised Rs 1,200 crore from the public issue. The offer comprises a fresh issue of 44.3 lakh shares worth Rs 350 crore and an offer-for-sale (OFS) of 1.07 crore shares, the proceeds from which will go to selling shareholders.

Also read: A deep dive into its business, risk factors and whether you should invest

“DOMS Industries is set for a blockbuster stock market debut,” said Shivani Nyati, Head of Wealth, Swastika Investmart. “This fervor aligns with the whopping 99x subscription, showcasing immense investor confidence and DOMS' strong fundamentals.”

Nyati also praised the company’s track record of impressive financial performance with consistent revenue and profit growth. This, she said, is further fueled by robust expansion plans that unlock exciting future potential.

DOMS Industries design, develop, manufacture and sell a wide range of stationery and art products, primarily under the flagship brand ‘DOMS’ in over 45 countries. It is the second largest player in India’s branded ‘stationery and art’ products market, with a market share of 12 percent, just behind ITC, which has a 20 percent market share. The company’s core products such as ‘pencils’ and ‘mathematical instrument boxes’ dominate the market with 29 percent and 30 percent market share, respectively.

Analysts were also impressed by the company's asset utilisation, as indicated by ROA of 16.1 percent, which is above the industry average. Despite the fully priced P/E, analysts noted, there are notable advantages that DOMS Industries Ltd brings to the market, including market leadership, a strong brand presence, established international partnerships, and a foothold in the export market.

However, once it is listed, some caution is warranted as valuation will likely become expensive.

“The hefty GMP already anticipates much of the company's future growth, leaving limited immediate gains on the table. Therefore, we recommend skipping fresh buys after listing,” said Nyati, adding that investors seeking quick profits can consider booking gains and exiting.

Long-term investors can hold, but further gains will result in earnings trajectory going ahead, analysts said.

“At the current juncture we advise investors to book profits on listing day and subsequently consider investing in the company after evaluating its quarterly performance soon,” advised Mudaraddi.