Indigo Paints IPO note




Offer Details

Price band

₹1,480 to ₹1,500 per equity share

Offer Open Date

 20 January 2021

Offer Close Date

22 January 2021

Listing Date (Est) / Credit of Share

 02 / 01 February 2021 

Lot Size


Total Issue Size

₹1,176.00 Cr

Fresh Issue

₹300.00 Cr

Offer for Sale


Face value


Book Building









Lead Managers

Kotak IB, Edelweiss Financial Services, ICIC Securities

Issue Registrar

LINK Intime



Capital Structure

Pre-Issue Promoter Share Holding


Post Issue Promoter Share Holding





Estimated amount (In Cr)

Funding capital expenditure for the Proposed Expansion


Purchase of tinting machines and gyroshakers


Repayment/prepayment of all or certain of our borrowings


General corporate purposes

Maximum 25% of Net Proceeds


Indigo Paints is engaged in the business of manufacturing paints and are the fastest growing amongst the top five paint companies in India. They are the fifth largest company in the Indian decorative paint industry which makes up the bulk (75%) of the industry demand in terms of revenue from operations for Fiscal 2020. The company was started in early 2000s unlike other companies which started 50-75 years earlier by a first generation businessman Hemant Jalan and has become 5th largest in less than two decades. The company is now profitable (margins trending towards industry average) Revenue growth at a healthy 24%. As of Sep30, 2020, they own 3 manufacturing facilities located in Jodhpur, Kochi & Pudukkottai with an aggregate estimated installed production capacity of 101,903 KL per annum (“KLPA”) for liquid paints and 93,118 metric tones per annum (“MTPA”) for putties and powder paints.


Indigo is the fifth largest paints manufacturing company with 2% market share. It is growing at quite a steady and fast pace, based on differentiated and innovative products (metallic emulsions, ceiling and floor paints, cement paints), high brand building & Ads spending, and differentiated business strategy: while top players started with metro cities and are now expanding to tier 3 and 4 towns, indigo has solidified their presence to some extent in smaller towns & villages and are now looking to expand to tier 1 and 2 cities. Company is able to successfully create demand for and sell their products, creating, expanding and utilizing larger manufacturing capacities (all proceeds of Fresh IPO issue will go to capacity expansion). Given the very small size (2%) compared to opportunity size, high industry growth (10-13%) and reasonable valuations (6x EV/sales), Indigo is a reasonable investment candidate as per available information.

Its implied market cap is 5,710cr. This gives a EV of 5,740 cr which with FY20 revenues of 620cr is at EV/ Sales of 9.25. This is still at a healthy 33% discount to the current valuations of the average of 2 decorative paints players Berger and Asian paints (13.8 EV/Sales).

We recommend investors to apply for the upcoming IPO given the attractive valuations (stated above), future the company is being driven towards, a consistent & healthy fund flows and a robust management team running the show quite efficiently. Buying at the listing price, the biggest risk would be the entire paints sector losing fancy and the valuations mean reversion for entire sector. Irrespective of such a “Black Swan” scenario if any paints player can justify a 9-10 EV/Sales valuation, Indigo Paints is the one due to the differentiated business model (tier 3/4 cities), the growth rates (20%+), the differentiated products portfolio, and the extensive brand building.

To Read our detailed report, please click here- Link

Source: DRHP


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