The maiden issue public issue of Indigo Paints, one of the fastest-growing paint companies in India is all set to open for subscription from 20th January 2021 and will be available for subscription till the 22nd of January 2021.
Established in the year 2000, Indigo Paints is the 5th largest company in the Indian decorative paints segment in terms of revenue for the fiscal year 2020. The company has three manufacturing facilities situated in Kerala, Rajasthan and Tamil Nadu.
The company intends to utilize the share sale proceeds towards funding capital expenditure for expansion of its existing manufacturing facility at Pudukkottai in Tamil Nadu, purchase of tinting machines and gyroshakers, repayment/prepayment of all or specific company\’s borrowings, and general corporate purposes.
Here are some quick facts about the Indigo Paints IPO:
The price band for the IPO is set at Rs. 1,488 to Rs. 1,490 per share.
The minimum lot size is of 10 shares. An individual retail investor can bid for a maximum of 130 shares or 13 lots.
The issue size for Indigo Paints is Rs. 1,176 crores at the higher price band.
Shares of Indigo Paints are expected to be listed around 2nd February 2021.
Key strengths and opportunities
• Consistent growth in revenue and profitability over the past few years.
• Strong brand recall and a significant first-mover advantage in product innovation such as Metallic Emulsion for walls, Tile Coat Emulsion for roof tiles, Bright Ceiling Coat for interior ceilings and Floor Coat Emulsion for driveways.
• Increasing demand for interior and exterior paints due to customers\’ growing preferences to aesthetics.
• Changing consumer behavioural changes leading to a reduction in re-painting cycle for interiors from an interval of 7 to 8 years in 2010 to 4 to 5 years in 2019.
• Gradual shift in consumer preference from traditional whitewash to better, value for quality and value for money paint, especially in Tier 2–4 Cities.
• Government\’s \’Housing for All/ affordable housing\’ measures have helped new demand for painting and help re-painting demand in the future.
• Government\’s Smart City Mission in 2015, to develop 109 cities as Smart Cities is expected to lead to a larger number of commercial and residential complexes being created, driving the demand for decorative paints.
Key challenges to consider while investing in Indigo Paints IPO:
In its Red Herring Prospectus, the company has listed some factors which may impact the future performance of the company, such as:
• The company does not have any long-term or exclusive arrangements with its dealers and any failure to continue with existing arrangements could negatively affect its business and results of operations.
• Intense competition from top players in the segment like Asian Paints, Berger Paints, Kansai Nerolac and AkzoNobel.
• The paint industry has high entry barriers that include developing an extensive distribution network through long-term relationships with dealers, the ability to set up tinting machines with dealers, significant marketing costs and the establishment of a distinct brand to gain product acceptance.
• Absence of long-term agreements with the company\’s suppliers for raw materials, and an inability to procure the desired quality, quantity of raw materials promptly and at reasonable costs, may have a material adverse effect on the company\’s business, affecting its operations, financial condition, and cash flows.
• The company’s proposed capacity expansion plans relating to its manufacturing facilities may be subject to the risk of unanticipated delays in implementation and cost overruns.
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