Flair Writing Industries Limited — Q3 FY25 earnings call

Call held 3 Feb 2025

Management summary

Flair Writing delivered a strong Q3 FY25 with robust revenue and profit growth, driven by existing segments and new initiatives. Strategic partnerships and new product launches are bolstering the creative and pencil segments. While seasonality impacted the pen business and working capital remains elevated, management is confident in Q4 growth and margin improvement through efficiency gains and new policies.

Highlights

  • Q3 FY25 Revenue from operations at ₹265 crores, up 17.6% YoY.

  • Q3 FY25 EBITDA at ₹45 crores, up 31.1% YoY, with margin expansion of 176 bps to 17.1%.

  • Q3 FY25 PAT at ₹29 crores, up 54% YoY, with margin expansion of 262 bps to 11.1%.

  • Strategic partnership with Maped, France, for distribution of products, expanding premium stationery offerings.

  • Launch of new 2mm mechanical pencil range, which has received very positive market response.

  • Awarded as top exporter by PLEXCONCIL and one of the best brands of 2024 by ET Edge.

Concerns

  • Q3 is a seasonally slow period for the Pen business due to holidays and festivities, leading to sequential decline.

  • Working capital remains elevated due to stocking for new products and Chinese New Year, though measures are being taken.

  • Domestic OEM revenues have been flat at ₹12-13 crores and are being discounted in future projections.

Key financials

2 periods

Q3 FY25

  • Revenue
    ₹265 Cr
    YoY +17.6%
  • Gross Profit
    ₹137 Cr
    YoY +17%
  • Gross Profit Margin
    51.9%
  • EBITDA
    ₹45 Cr
    YoY +31.1%
  • EBITDA Margin
    17.1%
  • PAT
    ₹29 Cr
    YoY +54%
  • PAT Margin
    11.1%

9M FY25

  • Revenue
    ₹782 Cr
    YoY +7.3%
  • Gross Profit
    ₹403 Cr
    YoY +9.4%
  • Gross Profit Margin
    51.5%
  • EBITDA
    ₹138 Cr
    YoY -2%
  • EBITDA Margin
    17.6%
  • PAT
    ₹88 Cr
    YoY +4.7%
  • PAT Margin
    11.3%

What they filed

Q1 FY27: revenue up 6.6%, net profit down 7.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue242 229 257 242 263 +9%256 +12%251 −2%258 +7%
EBITDA43 35 39 38 43 +0%36 +3%38 −3%36 −5%
Net profit32 27 28 27 36 +13%25 −7%29 +4%25 −7%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue (Q3 FY25)YoY Growth (Q3 FY25)Revenue (9M FY25)Growth (9M FY25)
Pens Business₹197 Cr10%₹606 Cr3%
Creative Segment₹45 Cr10%₹123 Cr10%
Steel Bottle Segment₹12 Cr—₹32 Cr—
Own Brand Sales₹232 Cr15%₹689 Cr10%
Domestic Own Brand Pens————

Capital allocation

high confidence
  • Capex ₹100 Cr
    • Backward integration for operating economies
    • Manufacturing polymer pencils, wooden pencils, and other stationery items through new subsidiaries
    • Expanding Steel Bottles capacity
    In FY '24, we did around INR110 crores of capex. In FY '25, around, again, INR100 crores of capex is what we are aiming at, I guess, from the PPT. So will it be possible for you to provide us segment-wise, how much have you incurred like towards Pens, towards Creative, towards Steel Bottle? How much capex has been incurred for each segment? ... But then let me just share with you that today, we are in the process of doing a backward integration where we bring about operating economies out here. We are adding capex in all these segments. Steel, we have already done and going forward, as the numbers improve, we are planning that the numbers will go up beyond the capacity, which we have built up today. We'll have to end up having a separate outlay plans for Steel Bottles also. So going forward, yes, at least all 3 segments is what we are looking at adding capex.
  • Debt Debt disclosed
    Our net debt negative status enabled lower interest costs on a yearly and sequential basis
  • M&A Maped, France Joint venture · Announced

    Strategic partnership for distribution of products to address the premium stationery segment and boost Creative division growth.

    Expected to generate incremental growth for the company and increase offering under the creative segment.

    Among the key highlights of the quarter was our announcement of strategic partnership with the Maped, France, for distribution of products. ... We took another decisive step in the overall development of our creative brand by partnering up with Maped. Maped is a French brand that has been in existence for close to 8 decades. They manufacture quality and premium stationery products and with this partnership, we will leverage our extensive network of distributors and retail touch points to distribute Maped's products in India.
  • M&A Disney Joint venture · Integrated

    Collaboration for manufacturing and distributing Disney branded products across categories.

    Currently manufacturing and distributing 20 Disney branded products.

    The collaboration with Disney is progressing well. We now manufacture and distribute 20 Disney branded products across categories.
  • M&A Monterosa Stationery and Flomaxe Stationery Acquisition · Integrated

    Initiatives to accelerate the growth of creative products, with Monterosa for Maped distribution and Flomaxe for pencil manufacturing.

    Monterosa has started distribution of Maped products; Flomaxe is setting up its manufacturing facility. Contribution to top line is currently nominal.

    So both the subsidiaries are our initiative to accelerate the growth of creative products. And one is going to help us in Maped, which will again help us in Creative. And the other is - more to do with the pencil manufacturing and polymer pencil manufacturing. ... So, Shraddha, what has happened is in Monterosa, we have started we've just started the distribution of Maped products. Whereas in Flomaxe, we are setting up the unit there. So once the units are set up, we'll have the manufacturing facility there. And Monterosa is more of a distribution channel, which we have developed. ... The contribution to the top line today is just a nominal, negligible number.
  • Liquidity Liquidity disclosed Higher other income on high cash balance.
    higher other income on high cash balance

Guidance & targets

Revenue Growth

  • Overall Revenue Growth Revenue Growth · current year · High confidence double-digit growth
    we are very confident on achieving a double-digit growth in the current year.

    — Mohit Rathod

Segment Growth

  • Creative Segment Growth Segment Growth · Ongoing · High confidence 18% to 20% growth
    maintaining the guidance of 18% to 20% growth in Creative.

    — Mohit Rathod

  • Creative Segment Growth Segment Growth · by the year-end · High confidence 20% growth

    Previously 28%-30% → 20% growth

    But current year, we will be at 20% growth by the year-end.

    — Mohit Rathod

  • Creative Segment Growth (long term) Segment Growth · next 3 years · Medium confidence almost around 26%
    going forward in next 3 years, we are targeting almost around 26%.

    — Sumit Rathod

Segment Revenue

  • Steel Bottles Revenue Segment Revenue · by '27 · High confidence INR120 crores
    by '27, we look at INR120 crores that's the guidance we have been maintaining, and we are reaching there.

    — Alpesh Porwal

Profitability

  • EBITDA Margin Profitability · next 2, 3 quarters · Medium confidence 19%-19.5%
    So in the next 2, 3 quarters, we see the numbers going back to 19%-19.5%.

    — Alpesh Porwal

In-house Manufacturing

  • Creative Segment In-sourcing In-house Manufacturing · by the end of '26 · High confidence 75%

    Previously 50% → 75%

    75% by the end of '26.

    — Mohit Rathod

Exports

  • Export Growth Exports · next year on · High confidence double digits
    So yes, from next year on, of course, we are targeting to grow it in double digits.

    — Mohit Rathod

What to watch in Q4 FY25

Overall Revenue Growth (Q4 FY25)

Next quarter (Q4 FY25 results)
Current Q3 FY25 growth 17.6% YoY, 9M FY25 growth 7.3% YoY.
Target Double-digit growth for Q4 FY25.

Why it matters

Verifies management's confidence in strong Q4 performance to achieve full-year targets.

we are very confident on achieving a double-digit growth in the current year.

Risks & concerns

  • Seasonality in Pen Business

    medium

    Q3 is a slow period for the Pen business due to holidays and festivities, leading to sequential dips in demand.

    Management acknowledged

  • Elevated Working Capital

    medium

    Working capital remains high due to strategic stocking for new product launches and Chinese New Year, but new policies are being implemented for reduction.

    Management acknowledged

  • Flat Domestic OEM Business

    low

    Domestic OEM revenues have been flat at ₹12-13 crores, and management is focusing on own brands, effectively discounting this segment in future growth plans.

    Analyst discounted in projections

Q&A highlights

8 direct
Q4 FY25 Growth Drivers Direct
So it's a combination of all 3 segments. Pen, of course, as you have seen in Q3, we grew by 10%. Going forward in Q4 also, we are targeting the same numbers. And going forward to Creative, of course, the growth will be better and higher because as we are giving the guidance or maintaining the guidance of 18% to 20% growth in Creative. And Steel Bottles also, the traction is good, as we said earlier also. And going forward also, we are maintaining the same momentum in Q4 as well.

Clarifies that Q4 growth will be broad-based across all segments, with Creative and Steel Bottles expected to maintain strong momentum.

Asked by Aradhana Jain

Steel Bottles Sequential Flatness in Q3 Direct
So in this category, Q3 is a slow period because most of the buying happens before the festival season. So normally, there is a lull of almost 30 to 40 days. And after that, again, the demands pick up. So it's a normal tendency in Q3. The numbers are a little low. But as you can see, we have maintained the top line compared to Q2 and Q3 is, we have maintained the numbers.

Explains that the flatness is due to seasonal buying patterns, with Q3 being a naturally slower period for this category.

Asked by Aradhana Jain

EBITDA Margin Improvement Timeline Direct
So in the next 2, 3 quarters, we see the numbers going back to 19%-19.5%. See, today, the reason is very simple. As we continue to invest in our teams and optimize our sales and distribution structure basically to unlock higher efficiencies, we are making additions across functional areas of sales and manufacturing. And these are necessary investments today to drive growth forward. And as we grow, we will see our margins also improving because these investments will start paying off in the coming quarters.

Provides a clear timeline for margin recovery, linking it to ongoing investments in sales, distribution, and manufacturing efficiencies.

Asked by Aradhana Jain

Maped Partnership Details and Contribution Direct
So Maped, as Sumit mentioned, it has a legacy of 8 decades, and they are primarily into premium stationery products, which is currently missing in our current portfolio of Creative products. So it's going to help us get into that segment. And going forward also, overall, the creative growth is going to be very, very positive with the help of Maped joining the Creative division.

Highlights the strategic fit of Maped for entering the premium stationery segment and boosting Creative division growth.

Asked by Sneha Talreja

Creative Segment Growth Target Revision Direct
Sir in your Q4 presentation, investor presentation, you had guided 28%-30% growth rate for the Creative segment. So this year, so far, we're not seeing that kind of growth come in. So for FY '25, do you still expect that kind of trajectory to continue? Or would you be revising the guidance downward? ... But current year, we will be at 20% growth by the year-end.

Clarifies a revision in the Creative segment growth target for FY25 from 28-30% to 20%, indicating a more realistic outlook.

Asked by Ananya Nichani

Mechanical Pencil Differentiation and Traction Direct
So talking about mechanical pencils, currently, we are the largest mechanical pencil manufacturer in India. And the capacity we are increasing on a year-on-year basis. And there is a difference between the regular mechanical pencil and the mechanical pencil we just launched, which is a 2 mm mechanical pencil, which, you can say, a kind of substitute to a wooden pencil, which looks and feel like wooden pencil, but it is a mechanical pencil, a 2 mm mechanical pencil. So in the earlier question, we were talking about that only that the response has been very, very positive. And that has helped us even penetrate our regular 0.5 and 0.7 mechanical pencils. So the overall category is in growing stage for us.

Explains the unique offering of the 2mm mechanical pencil as a wooden pencil substitute and its positive market reception, also boosting other mechanical pencil sales.

Asked by Aradhana Jain

Working Capital Improvement and Reduction Targets Direct
So given these 2 contributors to a higher working capital, like you pointed out, we are aware of this, but the new policies, which we are kind of bringing in and new measures, which will go to reduce the working capital. So you will see the impact in this quarter when you look at the 31st March quarter, we will see a very positive impact here.

Acknowledges elevated working capital and commits to new policies and measures to reduce it, with visible impact expected in Q4 FY25.

Asked by Resha Mehta

Domestic OEM Business Outlook Direct
So going forward, we have not even we are concentrating on our own brands and in domestic market, and we have not even taken into future projections, have discounted the domestic OEM business.

Indicates a strategic shift away from relying on domestic OEM business, focusing instead on own brands and discounting OEM contribution in future projections.

Asked by Resha Mehta

3 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview

Flair Writing reported a strong Q3 FY25, with revenue from operations growing 17.6% year-on-year to ₹265 crores. EBITDA increased by 31.1% to ₹45 crores, leading to a 17.1% EBITDA margin, an expansion of 176 basis points. Profit after tax (PAT) saw a significant jump of 54% to ₹29 crores, with PAT margin expanding by 262 basis points to 11.1%. For the nine months ended December 31, 2024, revenue grew 7.3% to ₹782 crores, and PAT increased 4.7% to ₹88 crores.

Strategic Partnerships & New Initiatives

The company announced a strategic partnership with Maped, France, for product distribution, aiming to strengthen its presence in the premium stationery segment and expand its creative offerings. This builds on the existing collaboration with Disney for branded products, now manufacturing and distributing 20 Disney-branded items. Flair also launched a new 2mm mechanical pencil range, designed as a wood-free alternative, which has received a very positive market response and is expected to be rolled out Pan-India by the end of Q4 FY25. These initiatives are part of a broader strategy to address the overall stationery and writing instruments market.

Segmental Performance and Growth Drivers

All divisions delivered healthy growth in Q3 FY25. The Pens business grew 10% year-on-year to ₹197 crores, despite Q3 being a seasonally slow period. The Creative segment achieved 10% year-on-year growth, contributing ₹45 crores to revenue. The Steel Bottle segment saw its revenue contribution more than triple to ₹12 crores in Q3 FY25, reaching ₹32 crores for the nine months. Management expects continued momentum across all segments, with Q4 historically being the strongest quarter due to exam season and export push.

Margin Management and Cost Efficiencies

Gross profit margins remained largely stable at 51.9% in Q3 FY25, expanding by 100 basis points to 51.5% for 9M FY25. The company achieved EBITDA margin expansion through rationalization of resources and controlled expense growth. Employee benefit expenses increased by 14.3% and other expenses by 8.4% year-on-year, both growing slower than gross profit. Management anticipates EBITDA margins to return to 19%-19.5% within the next 2-3 quarters as investments in sales, distribution, and manufacturing efficiencies start yielding results.

Capital Expenditure and Debt Status

Flair Writing incurred approximately ₹110 crores in capex in FY24 and targets around ₹100 crores for FY25. These investments are directed towards backward integration, including setting up manufacturing facilities for polymer and wooden pencils under new subsidiaries like Flomaxe, and expanding capacity for Steel Bottles. The company maintains a net debt negative status, which has contributed to lower interest costs and enabled higher other income on its cash balance.

Working Capital & Export Performance

Working capital remains elevated due to strategic stocking for new product launches and the Chinese New Year closure, which necessitated extra stock in December. However, management is implementing new policies and measures to reduce working capital, with a positive impact expected in Q4 FY25. Export sales of own brands increased by 33% year-on-year to ₹26 crores in Q3 FY25, and management targets double-digit export growth from FY26 onwards, noting that freight costs are easing. The domestic OEM business, which has been flat at ₹12-13 crores, is being de-emphasized in future projections.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Fast Moving Consumer Goods earnings calls