Indigo Paints IPO | 10 Things You Must Know

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Indigo Paints IPO | 10 Things You Must Know

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India’s fifth-largest paint company – Indigo Paints Ltd. – is looking to list on the Indian stock exchanges as it opens its initial public offering on Today.
Let's talk about it.

Also Read : How to Apply for IPO online (step by step guide)

1) About:

Incorporated in 2000, Indigo Paints is the fifth largest decorative paints company in India. The company is engaged in the manufacturing and marketing of a complete range of decorative paints including emulsions, enamels, wood coatings, distempers, primers, putties, and cement paints.

2) IPO Details:

The company is looking to raise close to ₹ 1,170 crore from the primary market via the fresh issue and offer for sale.

IPO Date: Jan 20, 2021 - Jan 22, 2021
Face Value: ₹10 per equity share
IPO Price: ₹1488 to ₹1490 per equity share
Market Lot: 10 Shares
Listing At: BSE, NSE
Finalisation of Basis of Allotment: Jan 25, 2021
Initiation of Refunds: Jan 28, 2021
Credit of Shares to Demat Acct: Feb 01, 2021
IPO Shares Listing Date: Feb 02, 2021

Also Read : IRFC IPO | 10 Things You Must Know

3) Financials:

Over FY15-20, the company’s revenue growth was over 47%, while its gross profit also grew at a similar rate. On the operating and bottom-line front, the company turned profitable in FY18. The company’s gross margins have averaged around 46.5%, while its EBITDA margins off-late have increased due to economies of scale.

The net worth of the company, as of September 30, 2020, was close to ₹ 224 crore, translating to a book value of ₹ 47 per share on a diluted basis. Indigo is virtually a debt-free company. As of September 30, 2020, it had a total debt of ₹ 19 crore, which would come down to ZERO as it is funding to pay-off its debt. The company has so far not announced any dividends as it turned profitable only three years back.

Also read: Top 5 PSU Stocks with 30-50% Upside Potential in 2021

4) Shareholding Pattern:

Promoters own 60% in Indigo Paints’, while the rest is held by non-promoter and public. After the share sale, non-promoter and public shareholding will increase to 46%.

5) Peer Comparison & Market share

The Rs 40,300-crore Indian decorative paints space is dominated by Asian Paints Ltd., Berger Paints India Ltd., Kansai Nerolac Paints Ltd. and Akzo Nobel India Ltd., which collectively own 66% of the market. Indigo Paints own 2% of the decorative paints segment.While Indigo Paints completely focuses on the decorative paints segment, that for Asian Paints account for 95-97% of revenue.

Also read: Decoding Technical Analysis for Traders & Investors.

6) Valuations:

Indigo’s earnings per share for the financial year 2020, post-dilution, comes to ₹ 10. At the upper end of the price band, the price-to-earnings ratio stands at 148.3 times Vs industry average of 80.6 times which is overvalued.

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7) Grey Market premium:

In the grey market today, a strong premium was seen as shares were trading at Rs 2,330 apiece, up Rs 840 or 56.37% from the IPO price of Rs 1,490 apiece.

8) Objects of the Issue:

The net proceed from the Indigo Paints IPO will be used against following objectives.

  • To meet the capital expenditure requirements for manufacturing facility expansion at Pudukkottai, Tamil Nadu
  • To purchase tinting machines and gyroshakers.
  • To repay all or certain borrowings.
  • To meet general corporate purposes.

9) Pros.

  • Virtually debt free.
  • Large product portfolio with differentiated products.
  • Well-proven, and consistent growth track record.
  • Strong brand equity.
  • Extensive network distribution.
  • Strategically located manufacturing facilities.

10) Cons.

  • The continuing impact of the Covid-19 pandemic.
  • Inability to identify or effectively respond to evolving preferences.
  • Inability to enter into new relationships with dealers and painters.
  • Not being able to enter into long-term arrangements with dealers.
  • Under-utilisation of its manufacturing capacities.
  • A significant portion of its sales are derived from Kerala, and any adverse development in this market could adversely affect business.

Suggestion: Apply for only 'one lot' and Subscribe this issue for big listing gains as well as for long term investment.

How to Apply for it?

This link will explain a step by step process to apply for the IPOs in India.

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Note: Data has been taken from Mrs. Bectors' Red Herring Prospectus, Bloombergquint, ET, financialexpress and BusinessLine

Akshay Seth
Research Analyst (SEBI Regd.)
Linkedin |

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