Consider this: think back to your school days when you relied on brands like Apsara, Camlin, Natraj, or even Faber Castell for your pencils. Now, enter Doms, a brand that’s revolutionizing the pencil industry. It might seem unusual to delve into the growth strategy of a pencil company, but Doms’ journey is truly remarkable.

Let’s explore how a small pencil manufacturer hailing from Umbergaon, Gujarat, is poised to achieve an annual revenue exceeding 1000 crores. Not only has Doms conquered the stationary market, but it has also outperformed established giants like Apsara, Nataraj, and Camlin.

In the stationary market, four prominent families dominate the entire industry landscape. Hindustan Pencils stands out as a major player, housing renowned brands like Nataraj and Apsara. 

With the largest manufacturing unit churning out 8 million pencils daily, Hindustan Pencils holds significant sway in the market. Next in line are the Dandekars, who oversee Kokuyo and Camlin brands. They wield considerable influence in the industry.

Lastly, there’s Santosh Rasiklal Raveshia and his family, who helm Doms. Despite the stationary market in India being valued at around 4,000 crores, pencils are perceived as a commoditized product. This has led to intense competition among the major players, resulting in significant challenges for profitability.

For instance, Hindustan Pencils has witnessed a notable decline in profits, plummeting from nine crores in 2015 to approximately one crore in 2018. In stark contrast, Doms has experienced a remarkable growth trajectory, with profits surging from 13 crores in 2014 to 26 crores in 2017.

DOMS Industries made an exceptional debut on Dalal street. Over the last four months, the stock surged almost 33 percent. The price band for the IPO was ₹750 to ₹790 per share. 

On 20th December 2023, the stock of DOMS Industries Ltd listed on the NSE at a price of ₹1,400 per share, a strong premium of 77.22% above the IPO issue price of ₹790 per share.

So, can this stationary brand continue to compound wealth for investors in the future? Well, Let’s find out.

Corporate Overview Of DOMS Industries

Doms currently holds a domestic market share of approximately 12%, according to Technopark Report. The company’s key goods, pencils and mathematical instruments boxes, have a market share of 29% and 30%, respectively. 

The company operates in more than 45 countries throughout the world. However, the Company’s market dominance should be largely attributed to its massive network of 4000 distributors, with over 1.2 lakh retail touchpoints.

Doms, the flagship brand, also houses several other brands and sub-brands, including C3, Amariz, and Fixyfix. C3 was created to cater to rural areas by offering affordable polymer-based pencils instead of traditional wooden ones.

Business Segments Of DOMS Industries

As a stationery and office supplies brand, Doms Industries offers a varied range of items. However, the domestic stationery business, which includes pencils, erasers, and sharpeners, accounts for 45%-47% of total income. 

This is followed by art materials such as coloured pencils and crayons, which provide 23%-26% of income. Kits and Combos, which combine separate products from the top two groups, account for 9%-10% of total sales. 

The list below includes both the Company’s product segments and individual products sold inside those segments.

Financial Of DOMS Industries

In the fiscal year 2023, DOMS Industries saw a substantial increase in revenue, surging by 77% to reach ₹1,211.89 crore as opposed to ₹683.6 crore in FY2022. Analyzing a span of four years, encompassing FY2020 to FY2023, the company displayed a  Compound Annual Growth Rate (CAGR) of 23% in revenue.

Simultaneously, there was a noteworthy upturn in net profit, experiencing a 500% increase from ₹17.14 crore in FY2022 to ₹102.87 crore in FY2023. Over the cumulative four-year period from FY2020 to FY2023, the net profit showcased 40% CAGR.

In FY23, DOMS Industries maintained favourable financial metrics with a Return on Equity (ROE) of 35.19% and Return on Capital Employed (ROCE) of 34.86%.

Future Plans Of DOMS Industries

Focus on Exports

Currently, Doms Industries exports its products to over 45 countries and serves its global clientele through a channel network established outside India, focusing on two segments: export to the FILA group and third-party exports. 

With the support of its global partner, the FILA group, it plans to extend its geographical footprint. Additionally, it aims to enhance its distribution capabilities in specific Southeast Asian and African countries. 

It’s worth noting that India’s contribution to the global stationery product market through exports is relatively modest, indicating significant potential for expansion. 

Moreover, the company anticipates benefiting from “China+1” strategy, which involves diversifying supply chains away from China. This strategy could further bolster India’s stationery exports and contribute to the company’s growth trajectory.

Expanding Product Portfolio

To broaden its product range, DOMS plans to diversify into related categories within the stationery and art materials market, which is predominantly occupied by unorganised players in India. Over time, the company has successfully introduced numerous creative, innovative, and unique products and aims to continue expanding its portfolio.

Additionally, DOMS aims to introduce products across various price points to enhance average revenue realization. The company has devised a business strategy to diversify its revenue streams by introducing products that complement its existing offerings.

Furthermore, DOMS has taken strategic steps to expand into growth segments. This includes acquiring a minority stake in ClapJoy Innovation Private Limited, a toy manufacturer, and a majority stake in Skido, a school bag manufacturer. These acquisitions signify the company’s commitment to capitalizing on opportunities in evolving market segments.

Continue Inorganic Growth

DOMS is expected to persist in its strategy of making strategic investments and acquisitions, which could lead to (1) enlarging its market share, (2) expanding its overall potential market share, (3) reinforcing its footprint in various regions, and (4) enhancing its backward integration capabilities.

Conclusion

DOMS Industries’ remarkable growth trajectory, driven by strategic expansion, product diversification, and inorganic acquisitions, positions it for continued success in the stationery market. With a strong focus on exports and leveraging the “China+1” strategy, DOMS aims to capitalize on global opportunities.

 As the company forges ahead, what are your thoughts on its future prospects? Do you believe DOMS will maintain its impressive momentum and cement its position as a leading player in the industry?

Written by Nalin Suriya 

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