Indigo Paints IPO – Should you subscribe?

Indigo Paints IPO has opened. Should you subscribe?

India’s 5th largest paint company, Indigo Paints, has launched its IPO. The IPO starts on the back of the Indian Railway Finance Corporation (IRFC) IPO, which was the first of many IPOs in 2021.

Indigo Paints

Indigo Paints is one of the fastest growing paint companies in India, and is headquartered in Pune. The company is engaged in manufacturing different types of decorative paints like enamels, emulsions, wood coatings, primers, distempers, 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, Dirtproof & 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.

IPO details

The IPO opens on January 20th 2021 and closes on January 22nd 2021. The issue is likely to list on bourses February 2nd 2021. The Indigo Paints IPO consists of a fresh issue of ₹300 crores. The IPO price band is ₹1488 to ₹1490 and the lot size is 10 shares. At the upper end of the price band, a retail investor can apply for up to 13 lots. The value of one lot at the upper end of the price band is ₹14,900. Kotak Mahindra Capital Company, Edelweiss Financial Services and ICICI Securities are the book running lead managers to the issue.

Verdict

In FY20, Indigo Paints had reported revenues of ₹625 crore with net profit of ₹48 crore. Though the IPO seems a bit overpriced, it would offer a good return on investment in the medium to long term. The company has craved a niche for itself by focusing more of Tier-2 and Tier-3 cities. The Indigo Paints IPO commands a 56% premium in the grey market and hints at strong listing gains as well.

You can apply for the IPO here.

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