Pune-based Indigo Paints has received market regulator SEBI’s approval to launch its maiden public offer. The company – one of the top five players in the paints industry – is backed by Sequoia Capital and plans to raise nearly INR1,000 crore (INR10 billion). Indigo Paints
Indigo Paints plans to issue fresh shares worth INR300 crore which are planned to be used for expansion of Pudukkottai plant in Tamil Nadu, purchase of tinting machines and gyro shakers, and repayment/prepayment of borrowings. In addition, Sequoia Capital’s two funds – SCI Investments IV and SCI Investments V – and promoter Hemant Jalan plan to sell 58,40,000 equity shares through an offer for sale (OFS).
Indigo Paints IPO will be managed by Kotak Mahindra Capital Company, Edelweiss Financial Services and ICICI Securities which have been appointed book running lead managers to the offer. 35% of the total shares offered in the IPO will be earmarked for retail investors.
The company filed its draft prospectus with SEBI on 11 November 2020 and received SEBI observation on 31 December 2020. Once received, SEBI’s approval is valid for 12 months and the company can launch its IPO anytime in this timeframe. According to market sources, Indigo Paints is likely to bring its IPO in the month of January 2021.
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Indigo Paints: Operating in competitive market
The company competes with the likes of Asian Paints, Berger Paints, Kansai Nerolac Paints and Akzo Nobel in the paints industry. To succeed in this highly-competitive market, Indigo Paints followed the strategy of initially tapping into Tier 3, Tier 4 Cities, and rural areas where brand penetration is easier and dealers have greater ability to influence customer purchase decisions. Subsequently, the company has expanded its presence in Tier 1 and Tier 2 cities.
As of 30 September 2020, the company owned and operated three manufacturing facilities located in Jodhpur (Rajasthan), Kochi (Kerala) and Pudukkottai (Tamil Nadu) with an aggregate estimated installed production capacity of 101,903 kilo litres per annum (KLPA) for liquid paints and 93,118 metric tonnes per annum (MTPA) for putties and powder paints.
Impressive financial performance
Over the last three years, the company has been able to boost its revenues and profits consistently, although the first half of FY2021 hasn’t been great as a result of suppressed economic activity in the aftermath of Covid-19 pandemic. In FY2020, its revenues stood at INR626.4 crore, up from INR403.1 crore in FY2018. Similarly, earnings jumped from INR13.2 crore in FY2018 to INR47.7 crore in FY2020. As a result, Indigo Paints has been able to boost its net profit margin from 3.3% in FY2018 to 7.6% in FY2020 while the figure for H1 FY2021 stood at 10.5%.