Omfurn India Ltd

[Karthick_S]

Today I Entered in Omfurn.

CMP: 73 Rs
Mcap: 60 Cr
P/E: 13.5

OMFURN BUSINESS OVERVIEW:
Omfurn India Limited (OIL) was originally incorporated in the year 1997 as a private limited company; subsequently in June 2017, the constitution was changed to Public Limited and in the same year it was also listed on the NSE Emerge Platform. OIL is engaged in manufacturing of furniture and prefinished wooden doors. The company primarily undertakes turnkey projects for corporate offices, hotels, International schools, prefinished wooden doorframes and shutters & Fire -Resistant doors for real estate developers. The product profile includes executive office furniture, international school furniture, modular office furniture, modular kitchen, bedroom furniture, wooden door & frame etc. Further, the company is ISO 9001:2015, ISO 4001:2015, OHSAS 18001:2007 certified. OIL operates through its manufacturing plant located at Umbergaon, Gujarat and its registered office at Mumbai, Maharashtra.

PRODUCT PROFILE:
a) Executive office furniture
b) International school furniture
c) Modular office furniture
d) Modular kitchen
e) Bedroom furniture
f) Wooden door & frame

INDIAN FURNITURE INDUSTRY:
The India Furniture market size reached US$ 21.4 Billion in 2022. Looking forward, IMARC Group expects the market to reach US$ 41.4 Billion by 2028, exhibiting a growth rate (CAGR) of 11.6% during 2023-2028.

Financial Performances:

Things attracted me to invest in this business:

1. Experienced Promoters
2. Established Presence: Existence since 1997 shows it’s a genuine business not like many SMEs born in last 5 years to make money out IPO mania.
3. Credit Rating: It’s a rated company, Rating available since 2014 – (Way before IPO)
   As per CARE there are total 50 million SMEs in India and out of these only 5% are rated.
   https://www.youtube.com/watch?v=l93mEsCkkOA

Why only 5% SMEs are rated ? They don’t want to open up their balance sheets to the world, truth is most of them won’t be able to compete if they start paying taxes.

This again shows these guys operate at the top of integrity level, they preferred to operate in white in the most unorganized sector of all.
4) Strong Clients Base. Their key Clients are:

5. Their revenue is 90Cr which is greater than M. Cap of 60 Cr.

Highly Under valued. it’s a Microcap company shares are available only in lots sizes (2400) No’s

Conclusion:
Omfurn India Limited emerges as a promising investment opportunity. Its long-standing presence, experienced leadership, creditworthiness, and robust financials contribute to a compelling investment case. The company’s alignment with the growth trajectory of the Indian furniture industry further enhances its potential for value appreciation. However, investors should conduct thorough due diligence and stay attuned to industry trends for informed decision-making.

[sameernics]

For the last 10 years the sales have been in the range of 20 to 30 cr. What has changed for them that the sales have doubled in the last year? Is it bcz of back to office post covid for many corporate companies driving this onetime demand?

[Karthick_S]

The surge in Omfurn India Limited’s sales, doubling in the last year, can be attributed to several key factors:

1. Niche Segment Focus: Omfurn caters to a niche segment, providing furniture solutions for commercial properties such as hotels, offices, and real estate developments. Their specialization in custom-made furniture for these specific environments sets them apart from mass-market brands like Ikea and Godrej, which predominantly focus on home furniture. This niche focus allows Omfurn to address unique and customized requirements, creating a demand for their specialized services.
2. Customized Solutions for Commercial Spaces: The nature of their business involves creating tailored furniture solutions for commercial spaces, including offices, conference rooms, and hotel rooms. These bespoke requirements cannot be fulfilled by standard, off-the-shelf furniture available in the open market. The need for customized furniture, designed and installed according to specific client requirements, positions Omfurn as a go-to choice for businesses with unique furnishing needs.
3. Increased Client Base: Omfurn’s clientele has expanded, especially in the real estate development sector. The demand for commercial properties, driven by urbanization and business growth, has fueled the need for specialized furniture in these spaces. Real estate developers, recognizing the value of customized solutions, have contributed to Omfurn’s increased client base.
4. Post-COVID Office Resurgence: The return to office environments post-COVID has likely played a significant role. As businesses resumed operations and adapted to new workplace norms, there could have been a surge in demand for office furniture and interior solutions. Companies investing in office renovations or establishing new spaces may have turned to Omfurn for their expertise in creating tailored commercial furniture.
5. Unique Offering in Unorganized Market: While there might be unorganized players in this space, Omfurn’s credibility, credit rating, and commitment to transparency distinguish it from many smaller competitors. Clients, especially in the commercial sector, may prefer reliable and organized suppliers for their furnishing needs.

In conclusion, Omfurn’s success in the past year can be attributed to its focus on a specialized market segment, the demand for customized commercial furniture, an expanded client base, and the resurgence of office-related projects post-COVID. These factors collectively contribute to the significant growth in sales.

[someshbiradar]

The last two quarter sales combined itself is 90.72cr and it is valued at 63cr which is undervalued.

[Karthick_S]

Omfurn Directors Biography from 2017 Annual Reports

[narenarora]

In AR 2023 chairman mentioned about FPO of 35 crores what is the status and proposed usage of the proceeds

Disc. Not invested.

[Dhvanit_Merchant17]

I am invested here and want to add few points:

1. Order Book: 96 crores.
   

   

2. Comparison of Listed peers:
   

   
   
   Source: omfurn - Search / X (twitter.com)

3. Related Party Transactions and Family Tree:
   

   

4. Annual Report:
   

   
   
   Source: VANSH SHAH on X: “Annual Report TLDR: 1. LVL Woods 2. 3D Pytha Software 3. Drillteq V-200 machine 4. Beam Saw SK370, Edgebander Jade 340 machines and Leader Mac 6 spindle moulder 5. Bonus 1:5 6. FPO 35 crores. https://t.co/s93qlWq1Lx” / X (twitter.com)

[Dhvanit_Merchant17]

FPO DRHP available on NSE website.
OmfurnIndiaLimitedFPO_DRHP.pdf (nseindia.com)

Now will be spending time to go through whole report.

[Samarth1]

does company operates through distributor network or markets its products on its own?

[faiz_akram]

But company’s OPM and netprofit figures are not consistent.

[Dhvanit_Merchant17]

Points from DRHP:

1. Sales Structure:
   
   

As per the latest sales bifurcation, it looks they are moving completely to manufacturing.

2. Receivables Ageing:
   
   

In absolute terms, things are mixed but overall age is increasing.

3. Product bifurcation:
   Supporting point number 1, company is prioritizing manufacturing of doors.
   

   

4. Capacity Utilization:
   

   
   
   Somewhat of erratic utilization in Modular Kitchen and Wardrobe.

Detailed Utilization:

The capacity utilization leaves much potential, at the same time raises questions for such low utilization levels and yet the company is planning for expansion (although the comparison also includes Covid period)

5. New Product (Capital Expenditure through FPO):
   
   

Execution remains a crucial part here, but the point that valuations are slightly decent gives this a good look. The pricing of FPO matters a lot and the willingness of promoters to dilute their stake at a certain level remains a question.
The company doesn’t communicate much at exchange.

The increase in remuneration from this year in addition to high related party transactions are a thing to monitor.

On top of that, in FPO, the company didn’t reveal customer base. Order book was also absent. (mentioned in Credit Report)

[Dhvanit_Merchant17]

It is quite possible of having distributor network (not independently verified) seeing very high share of top 10 customers in overall sales.

Disc: Invested

[vijayaudupa]

Post COVID, trend of flexible working is catching up. The five day office culture isn’t a norm for many IT companies now. The work life balance is becoming a topic of discussion. I’m bit skeptical of office furniture growth story. I see a trend of big companies reducing real estate and trying to reduce operations cost. Unless they pivot, can they manage outperform market?

[spvk1]

Future of Work: Smart Office Furniture is Meant to Draw Employees Back - Bloomberg

May be of some help in the discussion about furniture stocks and that too smaller companies. Trend has changed, mindset has changed, comfort is priority, strict fit chair has given way to comfy chair…

observation worth studying keeping in mind Indian companies in the field.

One more report from DCMSME portal of GoI.

Microsoft Word - Revised_Final (dcmsme.gov.in)

[Dhvanit_Merchant17]

Company released an Investor Presentation, a video on YT and has announced the FPO in times not ideal to invest. Company stays fair valued atm and historically overvalued but the base of FPO price 71-75, the company/MM will try to at least maintain that.

Investor Presentation:
OMFURN_13032024153921_NSEInvestorpresentation.pdf (nseindia.com)

Factory Visit video submitted by Company on Exchange:
Factory Visit Of Omfurn India Ltd - YouTube

RHP:
Omfurn-India-Limited-RHP.pdf (omfurnindia.com)

Holding of Promoters post issue: 51%

Disc: Invested

[Dhvanit_Merchant17]

The FPO is in a dire state and I have exited my major holdings.
There will be an enormous supply in this illiquid counter and the price should fall to FPO levels.
I will re-enter at that stage.
I never do sell now buy later type strategy but the QIB fiasco in AVP Infracon IPO and similar subscription here is indicating a 10% fall for sure and if not managed by LM, may go further down.

Disc: Invested