Indigo Paints IPO – Date, Issue Price, GMP, Price Band, Review, Analysis and News in 2021
Indigo Paints IPO would open for subscription on 20th January, 2021. Indigo Paints is one of the fastest growing paint companies in India. The issue size is expected to be around Rs 1,176 Crores. Should you invest in Indigo Paints IPO? What are the risk factors an investor should keep in mind before applying for this IPO? Let me review and provide detailed analysis and news about this IPO in this article.
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About Indigo Paints Limited
Indigo Paints is one of the fastest growing amongst the top five paint companies in India. They are the fifth largest company in the Indian decorative paint industry in terms of revenue for FY2020.
They manufacture a complete range of decorative paints including emulsions, enamels, wood coatings, distempers, primers, putties and cement paints.
They also identify potential product needs from customers and introduce differentiated products to meet these requirements, and create a distinct market for its products. For instance, they are 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.
Indigo Paints IPO Details
Here are the IPO issue details.
| Indigo Paints IPO – Issue Details | |
|---|---|
| IPO Date | 20-Jan-21 to 22-Jan-21 |
| Face Value | Rs 10 per share |
| IPO Price band | Rs 1,480 to Rs 1,490 per share |
| Issue Size | Total of Rs 1,176 Crores Fresh issue – Rs 300 Crores OFS – Rs 876 Crores |
| IPO Lot Size | 10 shares |
| Lead Managers | Kotak Mahindra Capital, Edelweiss Financials and ICICI Securities |
| Listing at | BSE and NSE |
Download Indigo Paints IPO Prospectus (DRHP)
Download Indigo Paints IPO RHP
Objects of issue – Indigo Paints IPO
Here are the objects of the IPO issue.
1) Offer for sale (OFS) of Rs 876 Crores: Money received under OFS would go to selling shareholders and company would not receive any proceeds.
2) Fresh issue of Rs 300 Crores: Proceeds would be used for:
a) Funding capital expenditure for expansion of the existing manufacturing facility at Pudukkottai, Tamil Nadu by setting-up an additional unit adjacent to the existing facility
b) Purchase of tinting machines and gyro shakers
c) Repayment/prepayment of all or certain borrowings
d) General corporate purposes.
Who are the company promoters?
Hemant Jalan, Anita Jalan, Parag Jalan, Kamala Prasad Jalan, Tara Devi Jalan and Halogen Chemicals Private Limited are the promoters of Indigo Paints Limited.
Company Financials
Here is the summary of the financial information of the company.
| Fin. Year ending |
Total Revenues (Rs in Millions) | Profits after tax (Rs in Millions) |
Profit % |
|---|---|---|---|
| Mar-2018 | 4,031.0 | 128.6 | 3.2% |
| Mar-2019 | 5,372.0 | 268.7 | 5.0% |
| Mar-2020 | 6,264.0 | 478.1 | 7.6% |
Its EPS for FY2020 is Rs 10.49 and last 3 years average EPS is Rs 7.68. If we annualize 6 months ending Sep-20 EPS, it works out to Rs 11.94.
What are the key strengths of Indigo Paints Limited?
Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.
1) Track record of consistent growth in a fast growing industry with significant entry barriers
2) Differentiated products leading to greater brand recognition and enabling expansion into a complete range of decorative paint products
3) Focused brand-building initiatives to gradually build brand equity
4) Extensive distribution network for better brand penetration
5) Leveraged brand equity and distribution network to populate tinting machines
6) Well-qualified and professional management team with a committed employee base
What are the various strategies of Indigo Paints Ltd?
Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.
1) Continue to focus on developing differentiated products to grow market share
2) Further strengthen its brand to consolidate its 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 its manufacturing capacities
Why to invest in this IPO?
Here are a few reasons to invest.
1) Indigo Paints is one of the fastest growing paint companies in India. Currently it stands in top-5 paint companies in India in terms of revenues for FY2020.
2) It has generated strong revenue growth in the last 3 years (CAGR 25%).
3) Its margins have improved in the last 3 years. It was generating 3.2% margins in FY2018 Vs 7.6% in FY2020.
Risk Factors of investing in this IPO
These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand them before investing.
1) An inability to protect, strengthen and enhance its existing company brand could adversely affect its business prospects and financial performance.
2) The continuing impact of the COVID-19 pandemic on its business and operations is uncertain and it may be significant and continue to have an adverse effect on its business, operations and its future financial performance.
3) The company engages in a highly competitive business and any failure to effectively compete could have a material adverse effect.
4) They may not be able to identify or effectively respond to evolving preferences, expectations or trends in a timely manner, and a failure to derive the desired benefits from its product development efforts may impact its competitiveness and profitability.
5) Company’s ability to grow its business depends on its relationships with the dealers and the community of painters, and any adverse changes in these relationships, or company inability to enter into new relationships, could negatively affect business and results of operations.
6) Company does not enter into long-term arrangements with its dealers and any failure to continue existing arrangements could negatively affect its business and results of operations
7) Their proposed capacity expansion plans relating to its manufacturing facilities are subject to the risk of unanticipated delays in implementation and cost overruns.
8) A significant portion of company sales is derived from the state of Kerala and any adverse developments in this market could adversely affect its business.
9) For complete internal and external risk factors, you can refer the RHP of the company.
Indigo Paints IPO Promoter Holding – Pre and Post IPO
Pre-issue share holding – 94%
Post issue share holding – 53%
Indigo Paints IPO GMP / Grey Market Price
Indigo Paints GMP is between Rs 820 to Rs 830 as on 17th January, 2021.
Indigo Paints IPO Dates / Timetable (Including Listing date)
| Indigo Paints IPO Schedule | |
|---|---|
| Offer Open | 20-Jan-21 |
| Offer close | 22-Jan-21 |
| Finalization of Basis of Allotment | 28-Jan-21 |
| Unblocking of ABSA and Initiation of Refunds | 29-Jan-21 |
| Credit of shares to Demat Accounts | 01-Feb-21 |
| IPO Shares Listing Date | 02-Feb-21 |
Indigo Paints IPO price valuations
Here is how the valuations look like.
1) On the upper price band of Rs 1,490 and EPS of Rs 10.49 for FY20, the P/E ratio works out to be 142x.
2) For last 3 years EPS of Rs 7.68, the PE ratio is 194x. If we annualize FY21 EPS based on 6 months ending Sep-20 EPS, the P/E works out to 125x.
3) Means, the company is asking the issue price of Rs 1,490 of the upper price band in the P/E range of 125x to 195x.
4) There are listed peers like Berger paints trading at P/E 177x (Highest) and Akzo Nobel at P/E 63x (Lowest). However, if you compare with DRP of Nov-2020, all these P/E are increased by 50%+. Considering these ratios, Indigo Paints IPO Price at Rs 1,490 is highly priced.
Indigo Paints IPO – Is this good or bad – Should you invest?
Indigo Paints IPO news is there for some time and investors have been eagerly waiting for this IPO.
Indigo Paints is among top 5 and fastest growing paint companies in India. It has shown strong revenue and margin growth. Its issue price is highly priced. I would have been excited if the issue price would have been on the lower side. But considering the current bull run, high risk investors can invest for listing gains as well as for short term. In the medium to long term, it could be risky proposition compared to its peers.
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FAQs about Indigo Paints Limited IPO
1) When is Indigo Paints IPO date?
The IPO would open for subscription on 20th January, 2021.
2) What is the Indigo Paints Limited IPO Size?
This IPO size is Rs 1,176 Crores.
3) When is Indigo Paints IPO allottment?
This IPO is expected to be allotted and shares would be credited by 29th January, 2021.
4) When is Indigo Paints IPO listing date?
Indigo Paints IPO is expected to list on 2nd February, 2021. It would be listed on both NSE and BSE.
5) What is Indigo Paints IPO retail discount?
This IPO does not offer any discount to retail investors.
6) What is Indigo Paints Limited IPO GMP?
Indigo Paints IPO GMP is at Rs 820-830 (as on 17th January, 2021) which is very high.
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Very high PE for a relatively new company.Dear retail investors….stay away.
They should not take us for granted.
I agree Subhadip. I would bet, investors won’t listen to you and me. Even this IPO would get oversubscribed by multiple times. It is already oversubscribed 2 times on day-1.
Subject to the risk of unforeseen delays and cost overruns in the implementation of their proposed capacity expansion plans related to its production facilities.
PE of various listed paint companies as on 06.01.2021 is:
Asian Paints : 118
Berger Paints : 127
Akzo Nobel : 63
These all are established paint companies in India working for decades having absolutely well established brand, distribution and market practices.
Indigo is asking for a very high PE valuation.
Since the market is in severe upmove, therefore, issue may have super oversubscription.
Agree Kamal. As indicated in our article Indigo Paints share price is highly priced. Bulls would drag this to oversubscription and one can expect listing gains. However for me, medium to short term could be concern due to high PE valuations. Any ways lets wait for share price confirmation before we conclude on this
Thank you
Thank you SS