Flair IPO: Checking 10 Key Risks for Potential Investors

The Flair Writing IPO, which commenced subscription on November 22 and concludes on November 24, has set a price band of ₹288 to ₹304 per equity share with a face value of ₹5.

The IPO comprises a fresh issue of shares, amounting to ₹292 crore, and an offer for sale (OFS) of equity shares with a face value of ₹2 each, aggregating up to ₹301 crore. The total size of the Flair Writing IPO is ₹593 crore.

Net proceeds from the new issue will be allocated towards establishing the New Valsad Unit, a writing instrument manufacturing facility in Gujarat’s District Valsad, funding working capital needs for the company and its subsidiaries, financing capital expenditures, and addressing borrowings. The company’s promoters include Rajesh Khubilal Rathod, Mohit Khubilal Rathod, Sumit Rathod, Vimalchand Jugraj Rathod, and Khubilal Jugraj Rathod.

Key Risks Identified by the Company in its Red-Herring Prospectus (RHP):

1. Capacity Expansion: Inability to execute plans for capacity expansion could impact operations and financial results.

2. Market Demand: The company’s success relies on adapting to customer demands in the volume-driven writing instrument market. Failure could negatively impact business operations and financial results.

3. Machinery Orders: The company has not placed orders for machinery worth ₹75.02 crore, which constitutes 100% of the total machinery to be purchased with the net proceeds.

4. Raw Material Costs: Increased raw material costs or supply shortages could adversely affect business operations and financial results.

5. Brand Reputation: Damage to the reputations of “Flair,” “Hauser,” and “Pierre Cardin” brands could impact operations, cash flows, and financial situation.

6. Distribution Network: Dependency on the distribution network makes the business vulnerable to disruptions, potentially impacting operations, business, and financial performance.

7. Market Competition: Intense competition from organized and unorganized players in the Indian writing and creative instruments market could materially impact business and financial results.

8. Raw Material Supply: Dependency on raw material imports makes the company susceptible to delays, interruptions, or reductions due to factors like changes in trade policy or geopolitical unrest.

9. Working Capital: Inadequate working capital could negatively impact operations, financial situation, cash flows, and business results.

10. Research and Development: Lack of a dedicated research and development department could hinder the timely and cost-effective development of new products.

Grey Market Premium (GMP) for Flair Writing IPO is currently +71, indicating a premium of ₹71 in the grey market. This suggests investor readiness to pay more than the issue price. Considering the upper IPO price band, the estimated listing price is indicated at ₹375, representing a 23.36% premium over the IPO price of ₹304.