Indigo Paints
IPO Details
Indigo Paints had filed draft papers for IPO in January 2020. Indigo Paints would raise Rs 1000 crore including the fresh issue of Rs. 300 crore and Rs. 700 crores offer for sale through its IPO. Indigo Paints will use Rs. 25 crore of this money to pay some of the borrowings.
The table below shows details about Indigo Paints IPO
History
Indigo Paints started in 2000 by manufacturing low-end cement paints and expanded its range to cover most segments of water-based paints like Exterior Emulsions, Interior Emulsions, Distempers, Primers, etc. Today Indigo Paints is among the five fastest-growing paint companies in India.
Company Analysis
The company had chosen three manufacturing facilities strategically close to sources of raw material, the three manufacturing facilities are in Jodhpur (Rajasthan), Kochi (Kerala), and Pudukkottai (Tamil Nadu).
Distribution of INR 545 Billion Indian Paint Industry Market by Technology is in such a way that 6% is Powder-based, 46% is Wate-based and 48% is Solvent-based. The Indian Paint industry is having a CAGR of 11%. The company's decorative paint segment constitutes 74% of total sales and the decorative paint segment is expected to grow at a CAGR of 13%. The average per capita consumption of Paints and Coating in the Asia Pacific is 4.7 Kg whereas the developed nations in the Asia Pacific are having consumption of 9.7 Kg per capita. The average per capita consumption in India is 4.1 Kg, average per capita consumption of Paints and Coating is increasing at a CAGR of 6.8% This data shows that there is a lot of scope in the Paint industry in India. In the decorative paints segment in India, Indigo Paint ranks 5th with a market share of 2%.
Indigo Paints is the first in India to launch these products.
→India’s first Metallic paint, which gives a unique look to your walls
→India’s first Floor Coat paint, which can withstand any vehicular traffic
→Unique Ceiling Coat paint, for brighter and whiter ceilings First-of-its-kind
→Tile Coat paint for roofs, which gives an excellent glossy look
The company has a large product portfolio.
Source: Indigo Paints DRHP
Financials
Source: Indigo Paints DRHP
The company generated a revenue of Rs. 260.2 crore for the first half of FY 21(which includes April, May, June, July, August, and September) which around 5% downside in revenues when compared to the first half of FY 20. And company clocked profits of 27.3 crores for the first half of FY 21 and the company generated profits of Rs. 5.9 crore first half of FY 20. Company hs a saved a lot of money on its material therefore despite a decrease in revenues company generated profits of approx 4.6 times more than profits in the first half of 2019.
The company generated revenues of Rs. 626.7 in FY 2019-20, Rs. 535.6 in FY 2018-19 and Rs. 389.2 in FY 2017-18. and company generated profits of 47.8 in FY 2019-20, Rs. 26.8 in FY 2018-19 and Rs. 12.5 in FY 2017-18. On seeing this data we can understand that company is speedily growing its revenues and profits from FY 18 - FY 20 the revenues are increasing at an average amount of Rs. 100 crore. on seeing three years of data company's revenues are growing at an average rate of 21% and profits are increasing at an average of 50%.
The company's basic and diluted EPS for the first half of FY 21 are 6.03 and 5.97. The company's diluted EPS for FY 20 is 10.61 and 10.49.
Valuation
The company's EPS is 10.49 and according to that company's P/E would be around 141, that's a lot it means that the stock would be trading at 141 times the EPS. But even Berger Paints is having a P/E of 144. Even the listed peers of the company are having the following P/Es Asian Paints: 109, Kansai Nerolac: 88, and Akzo Nobel: 55, the average is 99 P/E.
Conclusion
At such a high valuation buying is at a risk, for me, I would wait for some time and let valuation come down. Any dip in the company's stock price would bring buying opportunity in the stock when the company gets listed.
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