DOMS share price drops 5% on heavy turnover; Fila likely seller amid block deal buzz

Shares of DOMS Industries Ltd fell 5 per cent in Tuesday's trade amid heavy turnover. The stock came under pressure as promoter Fabbrica Italiana Lapis ed Affini SpA (Fila), which held a 26.01 per cent stake in the company as of March 31, looked to offload shares worth nearly Rs 900 crore through block deals. A large trade of 44.1 lakh shares, accounting for 7.3 per cent of total equity, worth Rs 980.6 cr change hands via block deal. Details of the block deal transactions are disclosed by stock exchanges after market hours.

DOMS shares fell 4.92 per cent to hit a low of Rs 2,200 on NSE. A total of Rs 1,116.92 crore worth shares changed hands on the counter within the first 15 minutes of trade.

Fila was looking sell up to Rs 892 crore worth of shares. The floor price for the transaction was set at Rs 2,100 per share, sources told Business Today. Up to 4,248,184 shares, representing 7 per cent of the company's outstanding equity, were expected to change hands through the block deal. The base deal size of the block deal comprised 3,152,167 shares, or about 5.2 per cent of the total shares outstanding, with an upsize option of up to 1,096,017 shares, or around 1.8 per cent of the total shares outstanding.

The offering was made to institutional and professional investors outside the United States in offshore transactions under Regulation S of the US Securities Act of 1933, and to qualified institutional buyers (QIBs) in the United States under Rule 144A.

JP Morgan India and BNP Paribas Securities India are said to be acting as joint placement agents for the transaction. No pricing guidance will be provided until the shares are crossed on the stock exchange, as per the offer document.

For the March quarter, DOMS reported 18.7 per cent year-on-year (YoY) revenue growth, driven by strong volume-led demand across key categories, including Scholastic Art Materials, Office Supplies, Paper Stationery, and Hobby & Craft, aided by increased capacity and new launches.

Analysts noted that continued investments in ballpoint pens and highlighters supported strong growth in the office supplies segment. The baby hygiene segment also delivered healthy growth, aided by seasonal demand and higher capacity, they said.

DOMS recently entered into an asset purchase agreement with Reynolds Pens India Pvt Ltd (RPI) for acquisition of certain assets, relevant contracts, employees and intellectual property relating to manufacture and sale of pens, markers, highlighters, and school supplies under the Reynolds brand. Aggregate consideration for the transaction is $3.7 million.

"Unlike diapers, where many investors had questions surrounding the decision to enter an unrelated category, pens is an ancillary business for DOMS IN. In addition, Reynolds is an age-old brand and has strong customer connect. Further, RPI’s portfolio breadth is diverse with strong focus on mid-market segment enabling
DOMS to scale the pyramid hierarchy of premiumization. We believe the acquisition could be value accretive in long term, if DOMS IN can lever its distribution strength of 145,000 outlets and scale the business," PL Capital said recently. The brokerage has retained 'Buy' on the stock with a target of Rs 2,883.