Unbiased Analysis of Indigo Paints IPO || January 2021 || ₹1170 Crore

Last Updated on January 26, 2021 by FinTuts
Reading Time: Around 5 minutes

In this article, FinTuts will share its views or insights about the Indigo Paints IPO, so that you can take a self-decision on your investment or wealth creation journey and can be financially literate and atmanirbhar.

Started in 2000, the Pune-based company, Indigo Paints Ltd is the fifth-largest company in the decorative paint industry in India in terms of Fiscal 2020’s revenue and seems to be the fastest-growing in the group of the top five paint companies in India.
The company manufactures a wide range of decorative paints and has been present across segments including interior and exterior emulsions, enamels, wood coatings, distempers, primers, putties, and cement paints.
Indigo Paints is backed by Sequoia Capital and coming up with around ₹1,170 crore IPO. Kotak Mahindra Capital Company, Edelweiss Financial Services, and ICICI Securities are the book running lead managers to the IPO issue.

Objectives of Indigo Paints IPO:

  • Funding capital expenditure for expansion of the existing manufacturing facility at Pudukkottai, Tamil Nadu (the “Proposed Expansion”) by setting up an additional unit adjacent to the existing facility
  • Purchase of tinting machines and gyroshakers
  • Repayment/prepayment of all or certain borrowings
  • General corporate purposes

Statistics of Indigo Paints IPO

Let’s look at the strengths of Indigo Paints:-

  • Large product portfolio with differentiated products
  • Well-proven and consistent growth track record
  • Strong brand equity, Extensive network distribution
  • Strategically located manufacturing facilities
  • The well-qualified and professional management team

Let’s look at the weaknesses of Indigo Paints:-

  • Subject to seasonal variations business 
  • Restrictions on the import of raw materials 
  • Inability to protect, strengthen and enhance an existing brand
  • A highly competitive business
  • Long-term relation management with dealers

Highlights of Indigo Paints IPO

  • Issue Size: Around ₹1,170 Cr
  • Issue Type: Book Built Issue IPO
  • Face Value: ₹10 per equity share
  • IPO Price: ₹1,488 to ₹1,490 per equity share
  • Market Lot: 10 Shares(1 Lot)
  • Min/Max Order Quantity: 10 Shares(1 Lot) – 130 Shares(13 Lot)
  • Minimum/Maximum  Amount: ₹14,900 – ₹1,93,700
  • Listing At: BSE, NSE
  • Retail/HNI/QIB Allocation: 35%/15%/50%
  • Issue Size: 78,53,422 shares ( Rs.1,170 cr) 
  • Fresh Issue: 20,13,422 shares (₹300 cr)
  • Offer for Sale: 58,40,000 shares (₹870 cr)
  • IPO Opening Date: Jan 20, 2021
  • IPO Closing Date: Jan 22, 2021
  • Basis of Allotment Date: Jan 28, 2021
  • Initiation of Refunds: Jan 29, 2021
  • Credit to Demat Account: Feb 01, 2021
  • IPO Listing Date: Feb 02, 2021

GMP of Indigo Paints IPO

Grey Market Premium(GMP) is the price at which a listed company’s equity shares are traded in the grey market. Grey Markets are basically unauthorized or unregulated equity share distribution channels other than the regulated stock market. 
Investors might mistake grey markets as illegal. But it help investors predict the performance of an IPO legitimately and sometimes it boost the listing price.
Tentatively, the Grey Market Premium of Indigo Paints IPO is around Rs.800-850. The Subject to Sauda and Kostak price of Indigo Paints IPO seems to be around Rs. 7,000 and Rs 8,000 respectively.

The Bottom Line | Verdict

The decorative paint market seems to be expected to grow at a CAGR of 13% and the industrial paint market seems to be expected to grow at a CAGR of 9.9% by 2024.

Looking at the financial performance of Indigo Paints over the last four years, the total income of the company showed good growth at a CAGR of 21.20%. The improvements in margin and attractive valuation with healthy return ratios are making Indigo Paints a good choice.

However, market experts suggest that Indigo Paints is overvalued in comparison to its listed peers such as Asian Paints and Berger Paints. Investors may take a position in the IPO and if allotted should book gains at the time of listing and may later add the stock at dips in lots.

We hope that this article might have surely helped you to understand in general about the Indigo Paints IPO.
If you liked reading about this article, please do visit our other articles regarding Mutual Fund or Passive Income related reviews.
Besides, should you have any concerns, please feel free to comment below or do reach out to us. FinTuts will be happy to help. #HappyInvesting.

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