Started in the year 2000, Indigo Paints had a modest beginning. It started out with the manufacture of lower-end Cement paints, and gradually expanded its range to cover most segments of water-based paints like Exterior Emulsions, Interior Emulsions, Distempers, Primers, etc. They are the fastest growing amongst the top five paint companies in India. From an early age, the Company spread its footprints across the country, with the rapid expansion of its reach across India. They are the fifth largest company in the Indian decorative paint industry in terms of their revenue from operations for Fiscal 2020. They consistently seek to launch first-to-market products by identifying niche product opportunities and introducing products that address these requirements. They were the first company to introduce certain category-creator products, including their Metallic Emulsions, Tile Coat Emulsions, Bright Ceiling Coat Emulsions and Floor Coat Emulsions in the decorative paint market in India. To create demand for their differentiated products, they 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. Other products that they introduced include their Dirtproof & Waterproof Exterior Laminate, Exterior and Interior Acrylic Laminate and PU Super Gloss Enamel, that comprise their value-added product portfolio. Revenue generated, i.e. invoicing as per contracted price, from sales of Indigo Differentiated Products represented 26.68%, 27.58%, and 28.62% of their total revenue from operations in Fiscal 2018, 2019 and 2020, respectively. As the first company in India to develop these products, They have had an early mover advantage in the markets they are present in, which has allowed them to realize relatively higher margins for these products compared to the rest of their product portfolio. Company typically commences distributing the products in new states to dealers in Tier 3, Tier 4 Cities and Rural Areas, and subsequently leverage this network to engage with dealers in Tier 1 and Tier 2 Cities and Metros as well. As of March 31, 2018, 2019, and 2020, their distribution network comprised 33, 33 and 36 depots, and 9,210, 10,246 and 11,230 Active Dealers in India, respectively. As of March 31, 2018, 2019 and 2020, the total number of tinting machines that they placed across their network of dealers was 1,808, 3,143 and 4,296, respectively. They work closely with their dealers and the painter community to understand customer preferences, receive feedback on their products and that of their competition, which enables them to formulate an effective strategy for product development, sales, marketing and pricing. As of September 30, 2020, Company owns and operates 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. Their manufacturing facilities are strategically located in close proximity to raw material sources that reduces inward freight costs, lowering their cost of raw materials. They also intend to expand their manufacturing capacities at their facility at Pudukkottai in Tamil Nadu, by adding capacities to manufacture water-based paints to cater to the growing demand for these paints. The proposed installed production capacity of the expansion unit is 50,000 KLPA and it is expected to be operational during Fiscal 2023. As of March 31, 2018, 2019 and 2020, their total installed production capacity was 46,608, 76,236 and 1,01,903 and capacity utilisation was 71.80%, 57.64% and 47.49% respectively and total capacity utilisation is 41.54% till 30th September, 2020 for their liquid paints. As of March 31, 2018, 2019 and 2020, their total installed production capacity was 48,944, 48,994 and 93,118 and utilisation was 66.98%, 90.61% and 50.87% respectively and total capacity utilisation is 57.98% till 30th September, 2020 for their powder paints. The Indian decorative paints market is expected to record a growth rate of approximately 13% in value and 10.2% in volume through 2024, driven by an increase in the disposable income of individuals and families, and various housing schemes, among other. As per financial performance, Indigo Paints has posted total income/net profits of Rs. 403.10 cr. / Rs. 12.86 cr. (FY18), Rs. 537.26 cr. / Rs. 26.87 cr. (FY19) and Rs 626.43 cr / Rs 47.81 cr (FY20). For upto H1 of FY21, company has posted profit of Rs 27.19 Cr on total revenue of Rs 260.24 Cr. So company has shown exceptional performance. Indigo Paints has posted an average EPS of Rs. 7.78 and average RoNW of 19.89% for last three fiscals. Issue is priced at a P/BV of 16.58 as per NAV of 89.87 on 30.09.20. As per FY20 earnings, P/E is around 150. If we attribute latest annualised earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 130. As per RHP, the listed peers are shown in above table. On BRLM's front, three BRLMs are associated with this IPO, and have handled around 40 IPOs in last three fiscals, and from last 10 IPOs, 3 opened below issue price and remaining opened above issue price on the day of listing. As of now, from last 10 IPOs, all are trading above issue price. ( As on 15.01.2021 ) As per financials, results are very good, RoNW is 19.89% for last three fiscals and issue looks fully priced with respect to current earnings. This industry is growing at good rate, and expected to grow at good rate for next 3-5 years. Performance of BRLMs are good. So we give SUBSCRIBE rating to this IPO and one may invest from long term perspective also.
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