Linc Pen & Plastics Ltd, the third-largest writing instruments maker in the country, has roped in a consulting firm to help expand its presence over the next three years. The company, currently present across 60,000 outlets, is eyeing to gain market share by expand its presence to five lakh outlets.

A third of the company’s revenue comes from export / overseas markets, spread across 40 countries.

Simultaneously, Kolkata-based Linc plans to develop pens – in the ₹10-20 price points – catering to the volume segment, and also improve margins.

According to Deepak Jalan, Managing Director, Linc Pen & Plastics, the idea of bringing in a consultant is to “enhance the spread of the brand” and to improve “revenue & profitability”. The company plans deeper penetration into Tier-II and other suburban markets that are dominated by unorganised players or cheaper copies of existing brands.

Growth plans

The company which had been witnessing a compound annual growth rate (CAGR) of 5 per cent is targeting 10-12 per cent growth in the next three to five years. That the company’s strategy is working is reflected in its nine-month-performance this fiscal, where revenue has seen a 14 per cent growth year-on-year (y-o-y). Turnover during this period stood at ₹299 crore and net profit at ₹14 crore.

“We are available across 60,000 outlets at present and the the target is to reach five lakh over the next three years. We want to reach deeper into the hinterland and have roped in a top consulting firm for hand-holding,” he told BusinessLine without naming the consultant.

Incidentally, the company tried organised retailing with ‘Office Linc’ standalone stores. However, repeated losses saw Linc shut down many of these outlets. “Whatever now remains is primarily for branding purpose. We realised retail was not our game, and focused more on manufacturing and distribution,” Jalan added.

The company, in which Japanese major Mitsubishi Pencil Co has a near 13 per cent stake, has three manufacturing facilities ― two in West Bengal and one in Gujarat. It reported a turnover of ₹367 crore and a net profit of over ₹5 crore in FY19.

Linc competes with Cello, Flair and Classmate (from ITC) across categories like pens and other writing instruments in the ₹4,000-crore Indian market.

Focus on margins

For pen makers in India, margins have been a major issue. This is because nearly, 70 per cent of the writing instruments market is dominated by pens priced at ₹5 and below, where margins are low. To counter this, larger players are rolling out bundled offers.

Linc’s operating profit margin declined y-o-y to 5.95 per cent in FY19, from 6.65 per cent in FY18.

According to Jalan, it was under such a scenario that Linc took the bold initiative of “developing” new offerings ― targeting the ₹10 and above price points ― through the two-year-old ‘Pentonic’ brand. The pen, made fully of plastic, has been received well, and is on course to report ₹100 crore turnover by FY21.

“A number of customers, who were previously using the ₹5 pens, have upgraded. Pentonic has already crossed ₹50 crore in sales and we are working on more offerings, including premium ones,” he said, adding that margin improvement was being witnessed this fiscal onwards.

“Moreover, we do not mind cannibalising our own ₹5 sub-brands if customers are willing to upgrade,” Jalan added. Linc has also discontinued several loss making sub-brands as it looks to focus on profitability.