It is one of the fastest-growing paint companies in India and in terms of revenue, it is the 5th largest company in the decorative paint industry. The company is engaged in manufacturing different types of decorative paints like enamels, emulsions, wood coatings, primers, distemper, putties, and cement paints.
It is the first company that started manufacturing certain differentiated products like Metallic Emulsions, Bright Ceiling Coat Emulsions, Tile Coat Emulsions, Dirt proof & Waterproof Exterior Laminate, Floor Coat Emulsions, Exterior and Interior Acrylic Laminate, and PU Super Gloss Enamel. The sales from these differentiated products are continuously growing as it was 26.68% in 2018 increased to 28.62% in fiscal 2020.
Indigo Paints has a strong market network with dealers in Tier 1, Tier 2, and Metros as well. It has 3 manufacturing facilities situated in Jodhpur (Rajasthan), Kochi (Kerala), and Pudukkottai (Tamil Nadu). It is further looking to expand its manufacturing capacities at Pudukkottai to manufacture water-based paints.
Indigo Paints is a decorative paint manufacturer. Its peers are companies such as Asian Paints, Berger, Kansai Nerolac, and Akzo Nobel. The size of the decorative paints industry in 2019 was Rs 40,300 crores and as per research by Frost & Sullivan, Indigo Paints had about 2% market share.
To create demand for Company’s differentiated products, Indigo paints initially tapped into Tier 3, Tier 4 Cities, and Rural Areas, where brand penetration is easier and dealers have greater ability to influence customer purchase decisions.
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.
Risk Factors of investing in this IPO
These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand them before investing.
1) An inability to protect, strengthen and enhance its existing company brand could adversely affect its business prospects and financial performance.
2) The continuing impact of the COVID-19 pandemic on its business and operations is uncertain and it may be significant and continue to have an adverse effect on its business, operations and its future financial performance.
3) The company engages in a highly competitive business and any failure to effectively compete could have a material adverse effect.
4) They may not be able to identify or effectively respond to evolving preferences, expectations or trends in a timely manner, and a failure to derive the desired benefits from its product development efforts may impact its competitiveness and profitability.
5) Company’s ability to grow its business depends on its relationships with the dealers and the community of painters, and any adverse changes in these relationships, or company inability to enter into new relationships, could negatively affect business and results of operations.
6) Company does not enter into long-term arrangements with its dealers and any failure to continue existing arrangements could negatively affect its business and results of operations
7) Their proposed capacity expansion plans relating to its manufacturing facilities are subject to the risk of unanticipated delays in implementation and cost overruns.
8) A significant portion of company sales is derived from the state of Kerala and any adverse developments in this market could adversely affect its business.
Verdict: Valuations are highly priced, since their is entry barriers in this sector, hence looks good for long term. Government is also focusing on House for all, this could be the beneficiary. In my view one should invest in this company for listing gains as well as for portfolio.
Sources:
Various publications
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cause actual events to differ materially from those expressed or implied in
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