Detailed Rationale

Crisil Ratings has upgraded its rating on the long term bank loan facilities of DOMS Industries Ltd (DOMS; part of the DOMS group) to ‘Crisil AA-/Stable’ from ‘Crisil A+/Positive’.

 

The ratings upgrade reflects the continuous and significant improvement in business and financial risk profiles of the group which is expected to sustain over the medium term.

 

The business risk profile improvement considers better operating efficiency, as reflected in higher profitability, better-than-expected revenue growth during fiscal 2025 while continuing diversification in the product profile.

 

In fiscal 2025, the Group’s consolidated topline increased 24.43% year-on-year to Rs 1,913 crore, driven by increased market penetration through higher retail touchpoints, a higher number of partnerships in modern retail, and better e-commerce penetration. During FY25, the Baby Hygiene Products (Uniclan/DOMS Wowper diapers, wet wipes) contributed approximately 6% of the FY25 sales. The group also expanded its product offerings in writing (highlighters, marker pens), premium kits/combos, adhesives, and paper products.
 

Consequently, earnings before interest, tax, depreciation, and amortization (EBITDA) increased year-on-year to Rs 353 crore in fiscal 2025, and the EBITDA margin improved to 18.2% by 50 basis points.
 

For fiscal 2026, the group is expected to earn revenues of Rs 2,200-2,300 crore, which is 19-20% higher than 2025, with a moderation in EBITDA margins to 17.5-17%.
 

The financial risk profile is supported by a healthy net cash accrual of Rs 268 crore in fiscal 2025 (Rs 187 crore in fiscal 2024). This resulted in a net cash accrual to adjusted debt ratio improving to 1.75 times as of March 31, 2025 (from 1.61 times in fiscal 2024 and 1.38 times in fiscal 2023). Healthy cash accrual, along with the fund raise done in fiscal 2024, resulted in an adjusted net worth increasing from Rs 353 crore as of March 31, 2023, to Rs 779 crore as of March 31, 2024. As a result, gearing decreased from 0.28 times to 0.15 times for the same period. The group's debt/EBITDA ratio declined to 0.42 times in fiscal 2024 compared to 0.52 times in fiscal 2023 (1.17 times in fiscal 2022) on account of improved profitability. The group has cash and cash equivalents of Rs 229 crore as of March 31, 2025

 

The rating continues to reflect DOMS group's established market position in the Indian stationery industry and its healthy financial risk profile. These rating strengths are partially offset by the susceptibility of operating margin to fluctuations in raw material prices and exposure to intense competition.

Analytical Approach

For arriving ratings, Crisil Ratings has combined the business and financial risk profiles of DOMS with its subsidiaries - Pioneer Stationery Pvt Ltd (PSPL), Micro Wood Pvt Ltd (MWPL), Skido Industries Pvt Limited and Uniclan Healthcare Pvt Ltd and Super Treads Pvt Ltd. This is because these entities, collectively referred to as the DOMS group, and have operational and financial linkages.

 

Unsecured loans from promoters of Rs.77.80 Crores as on 31st March 2025 considered at debt

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Established market position in Indian stationery industry: The group has established a strong market position and presence in the domestic market, backed by its pan-India presence with 125+ super stockists, 4,750+ dealers/distributors, and over 135,000 retailers. This extensive network is a testament to the group's commitment to reaching a wide audience and catering to the diverse needs of the Indian stationery market. As part of Fabbrica Italiana Lapis Ed Affini (FILA), one of the leading Italian multinational suppliers of art materials and related products, the group benefits from FILA's expertise and global presence. The promoter's extensive industry experience, spanning over four decades, further supports the group's market position and informs its strategic decisions.

 

The group has made steady investments in the latest technology, capacity improvement, and new product launches, including art and modeling materials, pen ranges, and backward integration, with in-house manufacturing of leads and erasers. These investments have resulted in better utilization of capacities, economies of scale, and a more efficient supply chain. The group is focusing on high-pull demand SKUs, which will increase shelf space, improve inventory churning, and enable price leadership in the market. This strategic approach will help the group to stay competitive and responsive to changing market trends.

 

The group is gearing up to set up one of the largest single-location manufacturing facilities in the stationery industry in the Asia Pacific region. Post completion of capex the group's position as a leading player in the Indian stationery market and enhance its capabilities to meet growing demand will further solidify. With its strong market position, strategic partnership with FILA, and ongoing investments in technology and capacity improvement, the group is well-positioned to continue its growth trajectory and maintain its leadership in the Indian stationery market.

 

• Strong financial risk profile: Capital structure continues to remain comfortable, marked by low total outside liabilities to tangible net worth (TOL/TNW) ratio of 0.44 times, as on March 31, 2025. Group has networth of Rs.967 Crores as on 31st March 2025. Going forward, TOL/TNW is expected to remain below 0.4 times supported by healthy net cash accruals and in the absence of large debt funded capex. Debt protection metrics should also remain healthy with expected interest coverage and NCA/Total Debt  of over 30 times and 2 times in medium term. Crisil Ratings believes DOMS will continue to have strong Credit metrics in the medium term.

 

Weaknesses:

• Exposure to intense competition: The group faces intense competition due to the highly fragmented Indian stationery industry, which is characterized by the presence of many unorganized players in the lower end of the product segment, such as pens, pencils, and adhesives. This intense competition is further intensified by the presence of other established brands, which poses a significant challenge to the group's market share and profitability
  
  The group's ability to navigate this competitive landscape and product diversification will be crucial over the medium term.

 

• Susceptibility of operating margin to fluctuations in raw material prices: Raw material prices account for major portion of overall production cost in stationery industry resulting in susceptibility of operating profit margin to fluctuation in raw material prices. The group is susceptible to fluctuations in prices of key raw material like polymer and graphite. However, on account of prudent management, operational efficiencies, and ability to partly pass on the prices to customers, the group’s operating margin had remained steady in range of 16-18% over past 3 years through fiscal 2025. While the operating margin is expected to moderate in fiscal 2026 on account of higher sales from non-stationery products, overall movement in profitability will remain key monitorable

Liquidity: Strong

Bank limit utilization is low averaging at  5.25 percent for the past twelve months ended March 2025. Cash accruals are expected to be over Rs 270 crore which are sufficient  against term debt obligation of Rs 14-15 crore over the medium term. In addition, it will act as a cushion to the liquidity of the group. High cash and cash equivalents of around Rs 229 crore as on 31st March 2025 also aid the liquidity.  Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business

Outlook: Stable

Crisil Ratings believes the group’s operating performance will continue to benefit from the established brand and comfortable financial risk profile.

Rating sensitivity factors

Upward factors:

• Higher than expected growth in revenue with operating margin of over 19% resulting significantly higher cash accruals
• Efficient working capital management and sustained financial risk profile backed by healthy capital structure and strong debt protection metrics
• Increase in market share.
   

Downward factors:

• Significantly lower-than-expected revenue, with operating margin remaining below 14% on sustained basis.
• Weakening of capital structure, with gearing increasing, because of large, debt-funded capex or leveraged acquisition or any large dividend payout or share buy-back

About the Group

DOMS, is one of India’s leading stationery and art products group.  The Group designs, develops, manufactures and sells a wide range of well-designed, quality stationery and art products, categorized into nine categories that include scholastic stationery, scholastic art material, paper stationery, kits and combos, office supplies, hobby and craft,baby hygiene products , back to school and fine art products. The Group’s products are primarily sold under the flagship brand ‘DOMS’, as well as through other brands/ sub-brands, like C3, Amariz, Wowper  and FixyFix. The Group’s multi-channel distribution network is spread domestically across 28 states and 8 UTs of India as well as in 50  countries globally covering the US, Africa, Asia Pacific, Europe and Middle East. The Group’s shareholders include the Raveshia-Rajani family that collectively owns 44.37% and FILA - Fabbrica Italiana Lapis Ed Afini SpA, Italy has 26.01% shareholding as on 31st March 2025. DOMS is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE

Any other information: Not applicable