Flair Writing Industries Limited (FLAIR.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Flair Writing Industries Limited Q3 and 9M FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Darshi Jain. Thank you, and over to you.

Thank you. Good morning, everyone. Welcome to the Flair Writing Industries Q3 and 9 Months FY '26 Earnings Conference Call. Today on the call, we have Mr. Vimalchand Rathod, Managing Director; Mr. Mohit Rathod, Whole-Time Director; Mr. Sumit Rathod, Whole-Time Director; and Mr. Alpesh Porwal, the Chief Financial Officer. A short disclaimer before we start this call. This call will contain some forward-looking statements, which may be based upon our beliefs, opinions and expectations of the company as of today. These statements are not a guarantee of future performance and will involve unforeseen risks and uncertainties. With that, I would now like to hand over the conference call to Mr. Vimalchand Rathod, the Managing Director, for his opening remarks. Thank you, and over to you, sir.

Good morning, and welcome, everyone. Thank you for joining our Q3 and 9 months FY '26 earnings call. I hope everyone had the opportunity to go through our investor presentation and press release that have been uploaded on the exchange. We are delighted to present a strong Q3 FY '26 performance, highlighting by a robust 20.1% year-on-year revenue growth, a 25.7% increase in EBITDA and 13.2% increase in PAT, reaffirming solid momentum and resilience of our business. Our performance in 9 months FY '26 has been particularly encouraging and with a strong 18.6% increase in revenue year-on-year, our revenue growth has consistently surpassed our stated guidance of delivering a 15% CAGR, reflecting a sustained momentum across our business and the strength of our underlying growth drivers. Hence, we are confident in surpassing our guidance of 15% for FY '26. We are also honored with the Excellence Award '23-'25 at the PLEXCONCIL Platinum Jubilee celebration, further reinforcing our leadership as a key exporter of writing instruments and stationery from India for over 4 decades. In line with our strong performance and positive outlook, the Board of Directors has approved an interim dividend of INR 0.50 per share, representing 10% of the face value of our equity shares. Going forward, our focus will continue to be on driving innovations supported by scalable and sustainable operations and a strong brand foundation, enabling us to deliver long-term growth and maintain industry leadership in the years to come ahead. I now hand over the call to Mr. Alpesh Porwal, our CFO, to discuss in detail about our Q3 FY '26 and 9 months FY '26 financial performance. Thank you.

Thank you, MD sir. Let's review the consolidated financial performance for Q3 FY '26. Revenue from operations for Q3 FY '26 stood at INR 317.7 crores, an increase of 20.1% year-on-year. The gross profit for the quarter was at INR 161.7 crores, which increased by 17.9% over the corresponding quarter of the previous year. Gross profit margin came in at 50.9%, a decrease of 95 bps year-on-year. While it is closer to the historical range, it decreased mainly due to a change of product mix. EBITDA for the quarter was at INR 56.9 crores, registering a growth of 25.7% year-on-year. EBITDA margin stood at 17.9%, an increase of 80 bps year-on-year. As we see the operating leverage kicking in, the incremental growth in translating more directly into EBITDA, reinforcing our confidence in the various business transformation initiatives we undertake right from increasing automation to deepening distribution relations for our wide range of innovative products. Profit after tax for the quarter was at INR 33.1 crores, increasing by 13.2% on a year-on-year basis. PAT margins for the quarter were 10.4%. The PAT grew at a slower pace than EBITDA, primarily because Q3 FY '25 had a higher other income. In Q3 FY '25, interest from bank FD -- sorry, in Q3 FY '25, there was an additional income of INR 3.2 crores due to sale of fixed assets -- profit on sale of fixed assets and investments. And also, there was a higher interest on the FD amount. Now the FD amount was on account of use of IPO proceeds for CapEx and expansion activities. Our Pens business grew by 7.3% year-on-year in Q3 FY '26 and overall, by 4.7% in 9-month FY '26. Our Pens business continues to maintain its leadership in India and has been a consistent and reliable compounder driven by own brand sales. Our performance was further driven by the remarkable growth trajectory of our Creative and Steel Bottles & Houseware businesses. These segments collectively delivered an impressive 78.5% growth year-on-year. The Creative division grew 71.8% year-on-year to INR 211 crores in 9 months FY '26, while the Steel Bottles & Houseware segment rose to 102.2% year-on-year to INR 64 crores. For Q3 FY '26, the growth of both these segments stood at 68.7% and 116.2%, respectively. Over time, we also do anticipate our revenue mix to shift with Creatives and Steel Bottles contributing a progressively larger share to the overall portfolio. Across these categories, our efforts to introduce novel additions and grow the lineup of portfolio has enhanced our shelf visibility, fueling the robust growth. During the quarter, we expanded our portfolio by introducing 28 new products across all range and categories. As on December 31, 2025, we have a total of 240 product offerings in Creatives. Overall, for the quarter, our total own brand sales grew by 23.3% year-on-year to INR 286 crores, of which the domestic own brand sales grew by 22.5% and export owned brands grew by 29.9%. This quarter's strong performance in the export sales was also supported by growth in OEM exports by 22.4%, bringing the overall export growth to a healthy 26.5%. During the first 9 months of FY '26, we delivered strong growth with revenue of INR 927.2 crores, registering an increase of 18.6% year-on-year and EBITDA of INR 166.8 crores, showing a 20.9% increase year-on-year and PAT of INR 104.8 crores, showing an increase of 18.8% year-on-year. This growth came from both domestic and export markets. Domestic own brand sales stood at INR 752.79 crores, reflecting a 21.3% year-on-year growth, while export own brand sales reached INR 88.38 crores, registering an impressive 28.8% growth. Together, own brand revenues totaled INR 841.18 crores, marking a 22% increase over the previous year. Export OEM sales contributed INR 67.37 crores with a 22.6% growth. Overall, domestic sales amounted to INR 771.4 crores, up 17.2% and export sales stood at INR 155.75 crores, up 26.1%. With respect to the domestic OEM business, our earlier OEM relationships have reduced to 0 as indicated in the previous calls. Despite this, we have exceeded our stated growth targets, even though performance was moderated by domestic OEM segment as highlighted earlier. We are also pleased to report that new customer engagements through our Flomaxe subsidiary have added a fresh revenue stream of INR 6 crores under domestic OEM. On CapEx and expansion initiatives, the new Valsad facility is slated to become partially operational in Q4, which will further strengthen our manufacturing capacity in Writing Instruments and Stationery. At our Flomaxe Surat facility, the total CapEx as of 9 months FY '26 stands at INR 9.6 crores, primarily directed towards plant and machinery and the subsidiary continues to contribute positively to the Creative segment. In addition, we have invested INR 8.28 crores in second new building currently under construction, which is expected to be completed by Q1 FY '27. On the qualitative front for the results, as highlighted by our MD, sir, the overall revenue growth as of 9-month FY '26 has consistently outperformed our stated guidance of 15% CAGR backed by sustainable and scalable growth delivered by our 2 diversified business segments, that is Creative segment and Steel Bottles & Houseware segment, we have high growth visibility over the next 2 years and thus are confident in delivering higher growth trajectory than our current guidance in the coming 2 years. While we still have levers to outperform the stated growth, currently, we would like to exercise prudence but remain open to adjusting our guidance based on our outlook. To ensure that the exceptional growth trajectory in our Creative segment continues well into the future, we are executing a set of strategic initiatives designed to strengthen our foundation and expand our opportunities. Our in-house manufacturing share has risen to 75%, enhancing operating efficiency, quality control and scalability. We are preparing a series of new product launches that will broaden our portfolio and keep us aligned with evolving customer preferences. Strategic collaborations are also central to our momentum. Our licensing partnership with Disney continues to bring character-based products to market, deepening engagement with younger audiences, while our distribution alliance with Maped, France positions us to deliver premium Creative products to domestic and global customers. In addition, the Flomaxe Stationery JV is expected to commence manufacturing of wooden pencils and also significantly boost capacity and sharpen our focus on polymer pencils, erasers, sharpeners and allied categories. Together, these initiatives are not only driving current performance but are carefully designed to sustain and accelerate growth in the Creative segment, ensuring that we continue to outperform guidance and deliver long-term value for our shareholders. In Steel Bottles & Houseware segment, we are driving growth through design innovations with in-house [indiscernible] and coloring, strong general trade distribution network supported by modern retail, quick commerce and e-commerce with a dedicated distribution team and expanding our portfolio to 50-plus SKUs with continuous new launches to meet all season demands. Having operationalized the Flomaxe JV in this year and Maped partnership starting to contribute to revenue, we are also exploring opportunities for inorganic acquisition in the fast-growing segments of our business. Looking back on the quarter, we take pride in the solid results achieved and extend our appreciation to our stakeholders for their continued support. With this momentum, we are focused on sustaining progress and driving the next phase of growth. Now I open the floor for question-and-answer session.

[Operator Instructions] The first question comes from the line of Kapil from Carnelian Asset Management.

First of all, congratulations on a great set of numbers. My first question is, can you give highlights about what would be the primary and secondary sales in the Creative and Steel Bottle segment?

Yes. So, when we talk about the primary sales in Creative, Q3, we did about INR 77 crores and 9 months in '26, which is INR 217 crores. That is of Creative, which is 72% up than last year. And when we talk about the Household category and Steel Bottle category, Q3 number is at INR 25 crores. The primary number is at INR 25 crores in Q3, and 9 months number is at INR 64 crores, which is 102% up than what we did last year.

So, sir, can we indicate like how much the secondary sales would have happened out of this?

So more or less, if you say, when we talk about the secondary sales is at par with the primary sales. because the distributors or the super stockers would keep stock of maximum 45 days to 60 days. They will not invest in a company more than that. So, the secondary sales is also at par with the primary numbers.

Sure. My next question is on the Creative segment. Within this segment, which product would be doing the maximum?

In Creative segment, there are almost 18 categories. And most of the products are doing very well. So, when you talk about the Creative, see, sharing the data would be a little sensitive because of the competition. But at the same time, we can say in Creative, over the years, we have launched 18 categories of products where all the new product launches that are -- which are standing out in the market are all to do with the innovative -- small, small innovative designs and the packaging what we have initiated. So that's the -- and the result is the combination of the products and as well as the placement what we are doing in the stores. We are increasing the throughput in each and every outlet. And we are making sure that all the innovative products, whatever we have launched in last 1.5 years are placed at the retail level.

Got it. Got it. And how much would have been the volume growth in Creative segment for us this quarter?

See, in terms of volume, it is very difficult because Creative products does not go in terms of volume. But yes, just to answer that question in terms of volume in Creative, the volume growth is as big as 141% if you take volume. Because see, in terms of volume, a set of Crayon has 12 colors, 24 colors, a set of -- coloring range in terms of sketch, they have 12 and 24. So it's very difficult to calculate volumes. But yes, for your number, it's about 141% growth.

Got it. Got it. And I guess similar would have been in previous quarter also?

Yes. In previous quarter also, it's similar.

Okay. And within the Pen segment, if you can give a breakup of the realization growth and volume growth?

So, when we talk about the Pen as a category, overall, in Q3, we have grown by 7%. And overall, 9 months, we have grown by 5%. When we talk about the volume, it is about 6% in Q3 and 3% volume in 9 months. And to give you some more insight, if we talk about our own brands, the volume has increased by 18% of our own brands in 3 months. And when we talk about 9 months, the volume of our own brand sales has gone up by 11%.

The next question comes from the line of Aradhana Jain from B&K Securities.

Congratulations to the team on the good set of numbers. A couple of questions from my side. Firstly, I'll start with the Pens segment. So, Pens witnessed good growth compared to the last couple of quarters that we've seen. However, if you see on a 9-month basis, it's still below our guided number of high single digit. So, what is the plan around that? For the full year, where do we see this number? And for, say, FY '27, what would be our guidance on the Pens side? That's my first question.

So Aradhana, just to answer your question on Pens. As we mentioned, overall, we have grown by 5%, guided by a strong Q3 numbers of 7%. Going forward in Q4 also, we are expecting a similar trend because of the run rate and the momentum going our way in this category. So -- and we have always maintained that going forward also in '27, '28, we would be targeting high single-digit number in that because still we feel there is a lot of scope in this category going forward.

And in our Pen segment, I believe Hauser XO is our best-selling product. Is that right?

Yes.

Yes. So, would it be possible for you to share that in terms of -- in the Pen segment, which is like 67%, 68% of our overall revenue, how much would Houser XO be contributing in the Pens side?

See, Aradhana, we would not like to share the number on a call. But if you want anything in personal, we can give you that. But because keeping competition in mind, it's very difficult to answer this question. But yes, just to answer that, XO does not contribute a major number in the overall Pen category.

Understood. And in terms of average realization of Pens, have you seen any improvement there vis-a-vis, say, last year?

It's stable. It's stable at INR 5.4 per piece.

Okay. And in the export side of things, which are the key geographies for us for Pens currently? And are we seeing any impact of U.S. tariffs on us? And from new FDA perspective, do we see any benefit to flow to us from that perspective on the export side of things?

As far as exports is concerned, we have been doing very good in U.S., UAE, Switzerland, Japan, Colombia, the South American market. So, all these countries have been growing. And to answer your question on the U.S. tariff, see, we were never dependent on U.S. as an export. Overall, if you look at it, it was only 3% of our total top line, but it has not impacted us in any way, U.S. tariffs. And when we talk about EU tariff declaration, see, we are already exporting to European countries. And with the new trade deal, we will definitely gain more momentum in our entire range of products to European nations and increase our exports in near future.

Understood. And in the Pen side, have we seen any market share gain in the last, say, 6, 9 months period versus what we were at a year back? And what would be our current market share in the Pen segment?

See, definitely, we have gained our market share in Pen because if you look at the overall -- our growth in our own brands, which is -- which I consider as a major business in Pens, overall growth is almost 18% volume share we have gained in our own brands, so which is very high compared to the competition. So, we are not loosing or we are not giving it up to any of the competition which is coming up. We are fighting in each and every category.

Understood. Just on Creatives, a couple of questions. One, I wanted to understand we are currently 75% in-house manufacturing, right? So what's the plan going ahead for, say, the next 1 year? Are we planning to increase that manufacturing capacity further? And how much is the capacity utilization there? And are we seeing any improvement in our margins coming directly because of the in-house manufacturing that we've shifted to?

See, with the new facility coming in, we'll definitely increase our capacity in Creative. Currently, which is 75%, we tend to bring it to 80% plus in coming quarters. And when we talk about the profitability margins improving, I would say we would be stable at the EBITDA level, which we are going currently.

Okay. And from Flomaxe perspective, if I heard it correct, we've already done close to around INR 10 crores of CapEx. How much more CapEx are we planning to do there? And what's the kind of revenue potential that we are expecting from the Flomaxe facility? And by when can we expect those numbers to start flowing in on our Creative number?

To answer your question, Aradhana, Flomaxe is already contributing to the revenue of Creative out here. We started manufacturing in this financial year. So far, you're right, we have done this investments of more than INR 9 crores in plant and machinery in this year. And in the pipeline is the new facility which we are coming up with, the additional unit, which we want to bring up at Surat, we have -- we expect an additional INR 8.5 crores of additional capitalization in terms of building and plant and machinery.

Okay. And in Creatives, have you started exporting or it's all domestic that we are currently doing?

Exports also we have started, but it's very small compared to what we are doing in domestic. It's too early. We are still catering to the domestic demand.

Understood. Just last question from my end on the Steel Bottle side. So fair to assume that whatever sales we are currently doing in the Steel Bottles is coming from stainless steel bottles or there's also some bit which started coming from the vacuum insulated tumblers, which are fairly new compared to the stainless-steel bottles? And which are the major channels where we are selling these? And from a price point perspective, are we competitive to the other leaders in the market or we are priced lower or premium to them?

To answer this question, I would say, when we talk about the vacuum steel tumblers, it's included in Steel Bottles only. It is a part of it. And we have been always manufacturing from day 1 steel tumblers and steel flasks, all are the part of Steel Bottle as a category. And Other than that, when we talk about the contribution, I would say the overall sales has been contributed mainly by all 3 divisions, which is general trade, modern trade and e-com.

And in terms of capacity utilization, where are we in the Steel Bottle side? And do we plan to also expand in the capacity utilization, like capacity in the Steel Bottles going ahead in the next 1 year? Any plans on that?

Yes. So going forward, as we progress more and increase the sales and have a more penetration into the domestic market, we definitely look into adding more facility and also maybe increase the category in this particular segment.

The next question comes from the line of Sneha Talreja from Nuvama Wealth Management Limited.

Congratulations on great set of numbers. I'll be quick with just 2 questions from my end. Firstly, there have been 5 consecutive quarters that you have exceeded volumes now, which is over 15-odd percent volume growth. Now the ask rate is just about 6%, like you have already mentioned on the call that you will be delivering 15% plus for the next 2 years. But is there any specific guidance that you would want to give us for this year as a whole as well as next year?

So I think for future guidance, of course, with the current momentum that we are going, we are -- like we are quite sure that we'll outperform our current guidance of 15%. And in the near future, also with the new Valsad facility also coming fully commissioning in Q1 of next year, I think we are confident that the momentum should continue, and we will definitely outperform our 15% guidance.

So are any numbers there?

No, I think I would just stick with the momentum that we are going on. And as you have seen in the recent past, I think in the near future, we'll try to continue that.

Sure. And it's been 2 consecutive quarters, we have seen a great run-up in your exports own brand business. Could you highlight what are the differentiated changes that you're doing here? Is it addition of new customers that you are doing? Or is it certain specific geography that you started hitting which is working well? Or is it anything to do with the China rebate coming down wherein we are replacing China in any particular geography?

No. I would say it is -- as we've discussed earlier also, it is to do with the kind of products which we have launched in 1.5 years. These products are gaining momentum, not only in India, but even in export market. And as I mentioned earlier, regarding the export sales, we are doing extremely well in the South American market, the Middle East market with a stable American business and European business.

Noted. Just 1 or 2 bookkeeping questions for Alpesh, sir. What would be the sustainable level of other income? We've seen a significant drop. I know you mentioned the reasons in the opening remarks, but what could be the sustainable number here? And also, what would be our working capital days standing at, at this point of time? And in case you can give receivables numbers also separately?

Right. Yes, you heard me right that the PAT, if I compare the PAT from Q2 to Q3, there was just one-off items which we saw in Q2 and hence, the difference out here. The PAT -- the other income, we don't -- I mean, it's just income from foreign exchange fluctuation and the interest on FD. And I expect it to continue in the range of INR 3 crores to INR 4 crores per quarter, not more than that. And as far as working capital is concerned, we said the working capital in the third quarter normally is on a rise due to a higher stocking of goods, which we have seen like especially from whatever we import from China because of the Chinese New Year holidays, we stock those items in advance. Q4 is the strongest for us and where we see the movement on all fronts, right, from the sales point of view to also getting into the consumption or the margins perspective because of the product mix and the larger volume of sales. So, we expect the working capital cycle to reduce there. And as I have stated in the earlier calls also, the working capital cycle will bring it down by 10 days at least in the -- by end of this year.

[Operator Instructions] The next question comes from the line of Resha Mehta from GreenEdge Wealth.

Many congratulations to the team for a very solid set of numbers, especially given the high base. So, the first question is basically on the Creatives. So, on the export side, right? So, you did mention that there is negligible exports on the Creative side. But if you could highlight, are we exporting anything on the Bottle side?

So that is also very negligible. On a couple of crores, we have exported. But yes, in near future, we will focus on export market as well. We are developing a few products for them.

So, is it just product development that is holding us back from starting exports in these 2 new segments?

I think we are still focusing on domestic market and developing products which caters to domestic market initially. And then in the meanwhile, in coming quarters, we will be focusing on export market as well.

Right. And on the Bottle side, right, so suddenly, our quarterly run rate, which used to be at around INR 12 crores has gone up to around INR 25 crores since the last 2 quarters, Q2 and Q3. So, anything specific there? Because of the anticipation of BIS, a lot of other competition, they had preloaded inventory imports from China, right? And like for a lot of our peers, that inventory probably has gotten extinguished. So is that one of the reasons why we are seeing a pickup in our bottles quarterly run rate?

So mainly to do with the new product development, which was due to be launched in Q2 and Q3. So we did that and the traction was good in those new development -- developed products. So that is the main reason why we have been able to -- because earlier, we had very few products to cater in domestic market, but now we have developed the entire range. And it's an ongoing process, which we will do it for next few quarters.

Now since the non-BIS inventory would have probably been exhausted from the system post the festive, would you now say that you all are on an equal footing versus your peers on the Bottle side as far as the trade channel acceptability is concerned? Or are we still focused on modern trade, e-com as the primary channels for bottles?