Indigo Paints shares kick started trading with a bumper premium of 75 percent over its issue price on February 2, given the strong IPO subscription and Budget-driven bullish market sentiment.
The stock opened at Rs 2607.50 on the BSE, against the public issue price of Rs 1,490, while the opening price on the National Stock Exchange was at Rs 2607.50, a 75 percent premium.
At 10:07 hours IST, Indigo Paints shares were trading at Rs 2,533.45, up 70 percent, with volumes of 364,745shares on the BSE.
On the NSE, it was quoting 70 percent higher at Rs 2,532.45, with volumes of 4,186,376 shares.
The fifth largest company in Indian decorative paint industry in terms of revenue from operations has raised Rs 1,170 crore through maiden public issue which was subscribed 117 times during January 20-22.
Prashanth Tapse, AVP Research at Mehta Equities believes Indigo Paints is an innovative painting solution company pioneer in launching first-to market kind of differentiated painting products with niche products addressing the fastest growing market demand in India.
With niche product portfolio, Indigo enjoys first mover advantage in generating higher margins compared to the rest of product portfolio in industry, said Tapse who also has an optimistic outlook on Indian decorative paint industry on the back of change in industry repainting cycle which used to be a 7-8 years cycle in late 2010. And, “now the same trend has reduced to 4-5 years in 2019 which makes the industry look attractive and due to change cycle we expect good volume demand going forward,” he said.
Indigo Paints is a relatively small player with a 2 percent market share but its profit has grown significantly, nearly 4x in the last 3 years.
The public issue consisted a fresh issue of Rs 300 crore and an offer for sale of Rs 870 crore by promoters and investors. The company will utilise fresh issue proceeds for future capex plan in Pudukkottai plant, purchase of tinting machines and retiring some borrowings on books.
Indigo Paints operates 3 manufacturing facilities in India, located in Rajasthan, Kerala and Tamil Nadu, with current installed production capacity at 1,01,903 KLPA and 93,118 MTPA as of March 2020.
Over the past years, Indigo Paints has listed an organic CAGR of 27 percent versus the top-4 players aggregate at 10 percent. “In future, too, we expect growth rate for Indigo Paints to outperform other players. Indigo’s growth is not constrained by industry growth or structure. Currently at 2 percent market share, it will still be at a low 4.4 percent market share 10 years down the line, if it grows at double the rate of the industry (18 percent for Indigo versus 9 percent for the industry),” said KR Choksey.
“With smaller players (i.e., players other than the top-4) comprising around 25 percent of the decorative paints market, Indigo’s growth is therefore unlikely to hurt growth of the top-4 players,” the brokerage added.
News Source:- Moneycontrol