Indigo Paints Limited IPO: Should You Subscribe?

Dates, Price band, Lot size, Risks, Review and broker recommendations etc.
Indigo Paints IPO

Indigo Paints IPO: Key Details

  • Issue lists at ₹2,607.50, a premium of 75% over the issue price
  • Raised ₹347.92 Crores via anchor investor sale of 23,35,020 shares @ ₹1,490
  • IPO subscribed 117.02 times, overall

Note: We neither trade nor encourage our readers to trade in the Grey Market. We share the GMP information for educational purposes only, so that, you can make an informed decision.

Company Information

Indigo Paints Limited, incorporated in 2000, is the fifth largest company in the Indian decorative paint industry in terms of revenue from operations for fiscal 2020 (Source: F&S Report). They are also the fastest company among the top five companies.

They manufacture a complete range of decorative paints including emulsions, enamels, wood coatings, distempers, primers, putties and cement paints. Indigo is the first company to manufacture and introduce certain differentiated products in the decorative paint market in India, which includes Metallic Emulsions, Tile Coat Emulsions, Bright Ceiling Coat Emulsions, Floor Coat Emulsions, Dirtproof & Waterproof Exterior Laminate, Exterior and Interior Acrylic Laminate, and PU Super Gloss Enamel (together, “Indigo Differentiated Products”)

Revenue generated, i.e. invoicing as per contracted price, from sales of Indigo differentiated Products represented 26.68%, 27.58%, and 28.62% of the total revenue from operations in Fiscal 2018, 2019 and 2020, respectively. As the first company in India to develop these products, they had an early mover advantage that has allowed us them realize relatively higher margins for these products compared to the rest of the product portfolio

Manufacturing Facilities:

As of September 30, 2020, Indigo owns and operates three manufacturing facilities located in Jodhpur (Rajasthan), Kochi (Kerala) and Pudukkottai (Tamil Nadu) with an aggregate estimated installed production capacity of 101,903 kilo litres per annum (“KLPA”) for liquid paints and 93,118 metric tonnes per annum (“MTPA”) for putties and powder paints. The company plants to expand the manufacturing capacities at Pudukkottai in Tamil Nadu. Proceeds from Indigo Paints IPO will be utilized to fund this capacity expansion

Key Differentiators:

  • Identified potential product needs from customers and introduced differentiated products to create a distinct market in the paint industry
  • Created an extensive distribution network across 27 states and seven union territories as of September 30, 2020, and
  • Strategic location of manufacturing facilities in close proximity to raw material sources that reduces inward freight costs, lowering cost of raw materials.
  • Good presence in Tier 3, Tier 4 Cities, and rural areas, where brand penetration is easier and dealers have greater ability to influence customer purchase decisions
  • Leveraged this network to engage with dealers in Tier 1 and Tier 2 Cities and Metros
  • Well-qualified and professional management team with a committed employee base

Competitive Strengths

  • Track record of consistent growth in a fast growing industry with significant entry barriers
  • Differentiated products leading to greater brand recognition and enabling expansion into a complete range of decorative paint products
  • Focused brand-building initiatives to gradually build brand equity
  • Extensive distribution network for better brand penetration
  • Leveraged brand equity and distribution network to populate tinting machines

Company Strategy

  1. Continue to focus on developing differentiated products to grow market share
  2. Further strengthen the brand to consolidate their position as a leading paint company in India
  3. Deepen penetration in existing markets and expand presence in select new territories by populating tinting machines
  4. Expand the manufacturing capacities

Proceeds from Indigo Paints IPO will be used to:

  • Fund capital expenditure for expansion of the existing manufacturing facility at Pudukkottai, Tamil Nadu by setting-up an additional unit adjacent to the existing facility;
  • Purchase of tinting machines and gyroshakers;
  • Repayment/prepayment of all or certain borrowings; and
  • Accommodate general corporate expenses

Indigo Paints Limited: Financials

201820192020 (Mar)2020 (Sep)
Revenue from Ops401.48 Cr535.63 Cr624.79 Cr259.42 Cr
Profit before Tax12.55 Cr33.71 Cr67.43 Cr35.2 Cr
EPS (Basic)2.885.9810.616.03
Price to Earnings (2020)Basic EPSP/E
Indigo Paints10.61140.43*
Asian Paints28.20109.23
Berger Paints6.76144.52
Sector P/E91.40
All values are as of Mar 2020, *Based on basic EPS at higher price band

Indigo Paints IPO Dashboard

Issue Details

TypeValue
Issue Size₹1,170.16 Cr
Fresh Issue₹300 Cr
offer for Sale₹870.16 Cr
Face Value₹10/- per Equity Share
IPO Price₹1,488 – ₹1,490
Lot Size10
LotsMin 1 – Max 13

Key Dates

Date TypeDate
Bid Open20/01/2021
Bid Close22/01/2021
Allotment Finalization28/01/2021
Initiation of Refunds29/01/2021
Credit of Shares01/02/2021
Listing Date02/02/2021

Lot Size and Price

LotsSharesAmount
110₹14,900
13130₹1,93,700

Promoter Holding

HoldingPercentage
Pre-Issue60.04 %
Post – issue54.00 %
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Indigo Paints IPO: Investor Quota and Shares Offered

Investor TypeQuotaShares on Offer
QIB50%15,56,690*
HNI15%11,67,514
RII (Retail)35%27,24,198
Employees70,000
Total100%55,18,402
*Shares left for bidding post anchor investor sale of ₹347.92 Cr

Indigo Paints IPO: Risks

  • An inability to protect, strengthen and enhance the existing brand could adversely affect business prospects and financial performance
  • Any failure to effectively compete in this highly competitive business could have a material adverse effect
  • Inability to identify or effectively respond to evolving preferences, expectations or trends in a timely manner, and a failure to derive the desired benefits from product development efforts may impact competitiveness and profitability
  • Company’s ability to grow the business depends on its relationships with dealers and the community of painters, and any adverse changes in these relationships, or inability to enter into new relationships, could negatively affect business and results of operations.
  • Company does not enter into long-term arrangements with its dealers and any failure to continue existing arrangements could negatively affect the business

For complete internal and external risk factors, you can refer the DRHP of the company.

Indigo Paints IPO: Registrar and Lead Managers

Registrar of the Issue

Link Intime India Private Limited
C-101, 247 Park, L B S Marg, Vikhroli (West), Mumbai400 083 Maharashtra, India

Phone:+91 22 4918 62000
Email:[email protected]

Lead Managers of the Issue
  • Kotak Mahindra Capital Company Limited
  • Edelweiss Financial Services Limited
  • ICICI Securities Limited
  • Link Intime India Private Limited

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