All of us have watched a Zebra in a paint advertisement accompanied by Indian Cricketer M.S. Dhoni. The Advertisement is done by this company – Indigo Paints. The company is actively involved in the paint industry. It has a variety of products in its product mix and the company is very well known in the industry due to its growth rate in the past three years. In the past years where all the other companies are growing at a rate of 6 – 12 %, this company is constantly growing at a rate of 15%. As per reports the company has high future growth as well due to the real estate policy changes in Mumbai and because of the robust CAGR for real estate and restructuring work of existing houses. The most famous product for the company is Indigo PU enamel.
Indigo Paints IPO enjoys a grey market premium of nearly 50 – 60 % due to its growth rate in past years and a varied product portfolio. Another reason is the P/E of this company. Where other companies like Asian paints and Berger paints have an P/E of 111 and 145 respectively, this company has an estimated P/E of 149 in the market. Also the EPS is roughly around 11. The grey market premium is expected to get a bit low but the company is assured of listing at a premium amount due to such reasons.
IPO Details
The IPO is set to launch on 20th January and it closes on 22nd January. The company has a book built method for issue. The Face value per share is set at 10 Rs. The price band is set at 1488 – 1490 Rs. per share. The minimum lot size is 10 shares and the listing is to be done at both exchanges : NSE and BSE. The issue size is around 1176 crore Rs. Out of the total size, fresh issue amounts nearly 300 crore Rs. and Offer for sale is for 58,40,000 equity shares. The maximum lot size is about 130 shares amounting to 193700 Rs. The IPO registrar is Link Intime India Pvt. Ltd. Also the listing date is set to be 2nd February, 2021.
Tabular Data
| IPO OPENING DATE | 20th January |
| IPO CLOSING DATE | 22nd January |
| ISSUE TYPE | Book Built Issue |
| Face Value per share | 10 Rs. |
| IPO price band | 1488 – 1490 Rs. |
| LOT SIZE | 10 shares |
| MINIMUM ORDER QUANTITY | 10 shares |
| ISSUE SIZE | 1176 crore Rs. |
| OFFER FOR SALE | 58,40,000 Equity shares |
| FRESH ISSUE | 300 Crore Rs. worth of Equity shares |
| LISTING AT | BSE, NSE |
| LISTING DATE | 2nd February |
The offer for sale has got a division before the launch of IPO. The bifurcation is as follows :
- Sequoia Capital Investments IV – 20.05 lakh Equity shares
- Sequoia Capital Investments V – 21.65 lakh Equity shares
- Hemant Jalan – 16.7 Lakh Equity shares
Important Dates
The IPO is set to get launched on 20th January and it closes on 22nd January. The allotment date for IPO is 28th January and the Refunds initiation process would kick start on 29th January. The shares would be credited into DEMAT accounts on 1st February and the IPO will get listed on 2nd February.
| IPO OPENING DATE | 21st Jan |
| IPO CLOSING DATE | 22nd Jan |
| IPO ALLOTMENT DATE | 28th Jan |
| REFUNDS | 29th Jan |
| DEMAT A/C CREDITED ON | 1st Feb |
| IPO LISTING DATE | 2nd Feb |
Promoter Holding
The company has major 6 promoters. Among them 5 are from the Jalan family and the last promoter is Halogen Chemicals Pvt. Ltd. They all own 94.6% stake in the company currently which will go down to 75%.
Also the lead managers for the IPO are :
- Edelweiss Financial Services Ltd.
- ICICI Securities Ltd.
- Kotak Mahindra Capital Company Ltd.
Objectives for IPO
The major objective of bringing in the IPO are :
- The company plans to expand its manufacturing facility in Tamil Nadu. The primary purpose for raising the money is to complete this expansion plan.
- The company also plans to increase its asset base by buying gyroshakers and tinting machines.
- The company can also use the additional capital to pay off the current borrowings.
- The capital can also be used for meeting general corporate purposes.
Company Financials
| PARTICULARS (in million Rs.) | 2019-20 | 2018-19 | 2017-18 |
| ASSETS | 4219 | 3732 | 2974 |
| REVENUE | 6265 | 5373 | 4032 |
| NET PROFIT | 478 | 268 | 129 |
Pros
- Great product portfolio with a diversified product mix
- Consistent growth since 3-5 years
- More growth rate than the other companies in the segment
- The company has a valuable and strong brand value and brand equity
- It has three manufacturing facilities and it sells paint across India, hence it also has a great distribution network available. It has strong networking in Metro cities and Tier 1 & Tier 2 cities.
- The manufacturing facilities are located strategically to help it cut costs on raw materials and somewhat cost cutting is also possible in transport facilities.
Cons
- The company is utilizing the for repayment of borrowings which is a good signal. But it also signals that the company cannot manage to pay the borrowings on its own and may need additional capital further on if it has cash flow deficits to pay the borrowings.
- The market share of the company is less and it ranks 5th among all the other competitors. Though it has a higher growth rate than its competitors, the company has to work hard on expansion plans so that it can get more quantity produced at its facilities. This will help the company to increase sales but this process will take some time. The only reason is the company is utilizing these funds for expansion plans and hence the facility will take time to get in working condition.
- Also the company has reduced assets in the Sept, 2020 period. The assets have taken a hit of approximately 100 million Rs. Also the revenue has decreased due to the nation’s decision for lockdown.
- As per the company’s product line it is clear that it cannot work at all in the time of pandemic. It will take time to recover from this hit of lockdown. Though the company is growing and recovering from this very fast yet the borrowing payments (an objective for IPO) is a major concern while subscribing for the IPO for long term purposes.
Product Line
The company has many products in its product mix. Some of the major ones are as follows :
- Enamels
- Emulsions
- Wood coatings
- Primers
- Distempers
- Putties
- Cement paints
It also has a variety available under the product mix which is :
- Metallic emulsions
- Bright ceiling coat emulsions
- Tile coat emulsions
- Floor coat emulsions
- PU super gloss enamel
- Interior and exterior acrylic laminates
- Waterproof and dirt-proof exterior laminates
How to apply for IPO with Zerodha ?
It is very easy to apply for an IPO now if you have a DEMAT account with Zerodha. Follow the steps below for the same :
- Logging into Zerodha console through its website or KITE platform.
- Clicking the IPO link present in the Portfolio section
- Click the INDIGO PAINTS IPO button and press the BID button
- Entering the details asked for like UPI ID, Quantity and price
- Submit the application form of IPO
- Visiting the application of UPI for approving the transaction
Now, applying for IPO online is possible with most of the Discount and online brokers.
