By Dominick Rodrigues
Mumbai, Jan 14: Indigo Paints Limited announced launching of its Initial Public Offer (IPO) from January 20 to January 22 for equity shares at between Rs 1,488 and Rs 1,490 per share –totally aggregating Rs 1,169 crores.
Hemant Jalan, Managing Director, Indigo Paints Ltd., told mediapersons via virtual press conferencing that the Pune-based company is one of the fastest-growing amongst the top five paint companies in India and fifth largest company in the Indian decorative paint industry in India in terms of its revenue from operations for FY20.
“The Company proposes to utilise the Net Proceeds: (i) Rs 1,500 million towards funding capital expenditure for expansion of its existing manufacturing facility at Pudukkottai, Tamil Nadu by setting-up an additional unit adjacent to the existing facility; (ii) Rs 500 million towards purchase of tinting machines and gyroshakers; (ii) Rs 250 million towards repayment/prepayment of all or certain of Company’s borrowings; and (iv) balance towards general corporate purposes.”
Replying to questions, Jalan said the Indian decorative paints industry stood at Rs 40,000 crores in 2019 with 11.5% CAGR growth from 2014 to 2019, and was set to grow at 13% CAGR from 2019 to 2024. About 78% paint demand arose from the ‘repainting cycle’ with smaller towns and areas accounting for 50% of this market, he said while noting that about 28 % revenue came from its differential paint products.
“The company started in April 2000 in Jodhpur with manufacturing cement paint and expanded its market footprint to 11 states by FY10. Today, we are present in 27 out of 28 states (excluding Himachal Pradesh) and our paint manufacturing locations are mostly based in close proximity to raw materials procurement in Rajasthan, Kerala and Tamil Nadu.”
“The challenge lay in overcoming the strong entry barriers — posed by the main four paint players in the market – including distribution network, brand equity, expanding Tinting machines network and also penetration of the Tier 4 towns and rural areas alongside establishing a ‘creditworthy’ relationship with 15,000 to 30,000 businesspersons.”
“While existing paint brands are household names, there is a huge clutter in the media for paint brands, while the large players have populated the retail network with ‘Tinting’ machines and there is lack of space in retail outlets as Tinting machines are capital-intensive,” he said adding “Our marketing strategy begins with Tier 3 and Tier4 cities to gradually work into larger cities – which have a huge untapped potential.”
“Today, 28% of our portfolio is ‘Differentiated Products’ on which we have focused our advertising, besides increasing installation of our computerized Tinting machines from the present 4600 (upto September 30, 2020) to between 17,000 and 20,000.”
To a question about the company focusing on smaller towns, he said “We have seen a very good bounceback in these areas — from which we get a large amount of sales – where we have not been impacted by Covid-19 and had barely 5% drop in sales from June 2020.” The next five years will see continuation of the company’s past strategy to expand its portfolio of Differentiated Products, while increasing its tinting machine and dealer network in small towns alongside brand strengthening advertising, he noted.
Describing the paint industry demand as being ‘seasonal’ in nature, Jalan said monsoons witnessed less demand, which began picking up during festivals like Diwali. “FY19 saw 35% in increased revenue that was affected in Fy20 due to the economic slowdown and pandemic lockdowns, though the higher margin products tend to sell more in the year’s 2nd half.”
“Where competition is concerned, the size of the industry paint “pie” is getting larger by 12% per annum (Rs 40,000 crores) with all –including even smaller players having Rs 50 crores p.a. revenue –witnessing coexisting growth together,” he said, adding ““South India is the paint-consuming leader and Kerala has contributed heavily to our revenue — due to its very experimental market in adopting new ideas through our 15-year thrust on Differential Products.”
The IPO comprises a fresh issuance of Equity Shares aggregating to Rs. 3,000 million by the Company (“Fresh Issue”) and an offer for sale of up to 5,840,000 Equity Shares by Sequoia Capital India Investments IV and SCI Investments V (the “Investor Selling Shareholders”), and the promoter selling shareholder, Hemant Jalan (the “Promoter Selling Shareholder” and together with the Investor Selling Shareholders, the “Selling Shareholders” and such offering of Equity Shares by the Selling Shareholders, the “Offer for Sale”).
The Equity Shares offered in this Offer are proposed to be listed at both BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”, together with BSE, the “Stock Exchanges”) post the listing. Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited and ICICI Securities Limited are the BRLMs to the Offer.
