Indigo Paints, one of the fastest-growing paint companies in India, is expected to debut on the bourses on February 2 after finalising the issue price at Rs 1,490 per share - the higher price band of its public offer.
Most experts feel the listing premium of the paint company could be around 50 percent over the issue price, given the strong subscription its public offer received, revived market sentiment, and the company being a differentiated product's maker, which boosted its margin.
The trading premium in the grey market is around 60 percent over its issue price, which increased considerably after the Budget-driven rally, from 50 percent registered in the previous session. It was trading at around Rs 850-900 per share on February 1 against Rs 740-750 per share on January 31, as per the data available on IPO Watch.
"Indigo Paints is expected to list at around 50 percent premium on listing day as the company enjoys an early-mover advantage in floor painting, with the growing sale of differentiated products which yields higher margin," Astha Jain, Senior Research Analyst at Hem Securities told Moneycontrol.
She likes the fact that the company remained least affected during the COVID-19-induced lockdown period (growth in sales & on EBITDA margin terms) as compared to peers due to extensive presence in small towns which might be one of the reasons that led the company outperform its peers and is now expanding faster into large cities.
The fifth-largest company in the Indian decorative paint industry in terms of revenue from operations has raised Rs 1,170 crore via its initial public offer (IPO) that opened for subscription during January 20-22. The offer included a fresh issue of Rs 300 crore and an offer for sale (OFS) of Rs 870.2 crore. The issue was subscribed 117 times.
The company will utilise fresh issue proceeds for expansion of the existing manufacturing facility at Pudukkottai, Tamil Nadu by setting up an additional unit adjacent to the existing facility (Rs 150 crore), purchase of tinting machines and gyroshakers (Rs 50 crore); and repayment certain of borrowings (Rs 25 crore).
"After looking at investors strong demand, we expect around 40-47 percent plus listing premium on the issue price," Prashanth Tapse, AVP Research at Mehta Equities, said.
Gaurav Garg, Head of Research at CapitalVia Global Research agrees. The expert feels the stock is likely to give good returns on the day of listing unless the Budget fails to meet investors' expectations. "The fundamentals of the company is strong, and the stock's fair value is expected to be in the range of Rs 2,000-2,100 per share.
Indigo Paints was the first company to launch differentiated paint products and has enjoyed the first-mover advantage. The revenue from premium products categories has registered a CAGR of 30 percent in FY18-20, while the revenue contribution from the same has increased from 26.7 percent in FY18 to 28.6 percent by FY20.
It owns and operates three manufacturing facilities located in Jodhpur (Rajasthan), Kochi (Kerala), and Pudukkottai (Tamil Nadu) with an aggregate estimated installed production capacity of 1,01,903 kilolitres per annum (KLPA) for liquid paints and 93,118 metric tonnes per annum (MTPA) for putties and powder paints.
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