Indigo paints ltd IPO

review on Indigo Paints IPO

1. INDIGO PAINTS LTD

2. Started in the Year 2000 The company is a well versed manufacturer as well as trader of lower end cement paints and covers a wide range of segment wised products The Company stands out as one of the strongest contender in the Indian paints industry by offering a wide platform of varied products catering to diversed lifestyle About The Company

3. It has summed up all its products under one umbrella named “INDIGO” There has been a change in its logo

4. The brand covers a zebra with multicolored strips over its body instead of black and white which entails about its varied offerings to painting needs The brandline behind sums up unexpected solutions to painting needs About The Brand

5. Strengths- 1]Fifth largest market cap in the paints Industry 2]Stronger EPS Growth and Profitability 3] Favourable Asset and Inventory Turnover Ratio 4]Company low on debt 5]Efficient Product development mechanisms 6]Increasing cashflows from operating business Weakness- 1]Company unable to generate positive net cashflows 2]Declining Share price SWOT Analysis

6. Opportunities- Indian Decorative paint industry expected to grow by 13% in value and 10.2% in volume by 2024 driven by increase in disposable income of individuals and families. Threats- as such nothing

7. Exterior Emulsions- a] Indigo Multicolor Emulsion b] Premium Sheen Interior Paint c] Luxury Interior Paint and many more… Interior Emulsions- a] Premium XT Exterior Paint b] Dirt proof and water proof exterior paint and many more… Product Range

8. Putties and Primers- a] Universal Primer b] Waterproof wall putting and many more… Enamels- a]Satin Enamel b]PU super Glossy Enamel and many more… Wood Coatings- a] Interior and exterior single water based PU b] Anti termite solution c] Interior Sanding sealer and many more….

9. Others- a] Bright Ceiling Paint b] PU Floor Coating Paint c] Aluminium Paint d] Roof Glossy Paint and many more…

10. Particulars FY 2019-20 FY 2018-19 FY 2017-18 FY 2016-17 Revenue 621.82 532.77 418.16 332.56 Expenditure 553.39 498.57 406.87 305.23 EBITDA 68.43 34.2 11.29 27.33 Finance cost 5.59 4.66 3.81 2.66 PBT 67.43 33.71 2.26 -17.58 Financials Condensed Statement of Profit or Loss INR in crores

11. Revenue from operations have been consistently rising from 289crs in FY 16-17 to 413crs in FY 17-18 by 42.9% and to 535crs in FY 18-19 by 29.54% and to 624 crs in FY 19-20 by 16.64%. The increase in revenue is at a decreasing rate . Revenue is generated through sale of manufactured items as well as traded items however turnover from dispatch of manufactured items were 96.72% and those from traded goods had been 2.8% of total turnover for the FY 19-20 Total expenditure has also been increasing from 305crs in FY 16-17 to 408 crs in FY 17-18 by 33.77% and to 498crs in FY 18-19 by 22.06% and to 553crs in FY 19-20 by 11.04%. The increase in the total expenditure has been increasing at decreasing rate. Major portion of total expenditure comprises of cost of material consumed and other expenses .

12. EBITDA has been consistently increasing at an increasing rate. During Fy 16-17 EBITDA had been negative 14 crs which had turned positive to 6 crs in FY 17-18 and to 38crs in FY 18-19 and to 73 crs in FY 19-20 Finance cost has increased by 42.23% in FY 17-18 and by 22.3% in FY 18-19 and by 19.05% in FY 19-20.

13. Balance Sheet Extract Particulars FY 2019-20 FY 2018-19 FY 2017-18 FY 2016-17 Equity Share capital 29.02 28.85 28.59 28.59 Reserves 149.73 100.31 71.33 68.76 Long term Borrowings 27.54 32.32 8.91 8.24 Short term borrowings 17.97 28.69 22.64 25.48 Other Long term borrowings 3.85 3.17 1.79 Trade Payables 138.59 136.24 112.79 84.69 Other Current Liabilities 27.63 23.19 14.88 11 Tangible Assets 169.83 117.57 63.91 49.89 Intangible Assets 30.92 30.98 31.04 41.25 Loans and advances 5.48 4.07 3.36 0.9 Inventories 76.76 69.33 50.76 47.54 Trade Receivables 104.47 103.85 104.07 78.47 Cash and cash equivalents 5.68 13.85 4.64 7.71 INR in Crores

14. Initially there had been two class of shares in the capital structure of the entity viz equity shares as well as preference shares however the preference shares had been redeemed during FY 18-19 Reserves of the entity had been consistently increasing from 68.76 crs in FY 16-17 to 71.33 crs in FY 17-18 by 3.73% and to 100.31crs in FY 18-19 by 40.62% and to 149.73 crs in FY 19-20 by 49.63%. This indicates that the entity is effectively ploughing back its profits for business purpose There has been decrease in the total outstanding amount of long term borrowings by 14.79% which has been due to repayment of outstanding borrowings Inventories had been consistently increasing by 47.54 crs in FY 16-17 to 50.76 crs in FY 17-18 by 6.77% and to 69.33crs in FY 18-19 by 36.58% and to 76.76 crs in FY 19-20 by 10.72%. Increase in levels of inventory had been due to increased business operations

15. Condensed Cash Flow Statements Particulars FY 2019-20 FY 2018-19 FY 2017-18 FY 2016-17 Net cash flow from operating business 85.86 50.39 27.04 -25.88 Net cash flow from investing activities -75.12 -62.19 -22.73 15.26 Net cash flow from financing activities -16.9 19.02 -4.38 4.59 Net increase or decrease in cash flow -6.16 7.22 -0.07 1.68 INR in crores

16. The entity had shown a positive growth in net cash flows from its operating business. During FY 16-17 the net cash flows had been negative however there has been good positivity reflected in FY 17-18 whereby net cash flows had been 27.04 crs which further enhanced to 50.39 crs in FY 18-19 and to 85.86 crs in FY 19-20. This shows that entity is able to generate good cash flows from its operating business . Net cash flows from investing activities had been consistently negative for 3 consecutive FY reason being generated cash flows from operating business had been pumped in to for the purpose of making capital investments . The entity was unable to generate favorable net cash flows which is clearly evident from the figures depicted. The net cash flows for the FY 16-17,17-18 as well as 19-20 had been negative.

17. Financial Ratios Particulars FY 2019-20 FY 2018-19 FY 2017-18 FY 2016-17 Basic EPS 16.5 9.32 0.9 -5.55 Book value per share 61.59 44.77 34.95 34.05 PBIT Margin(%) 11.68 7.21 1.78 -5.15 ROE(%) 26.74 20.8 2.57 -16.29 ROCE(%) 30.84 20.89 5.72 -12 Asset turnover(%) 148.06 143.52 148.11 117.48 Inventory turnover 8.14 7.73 8.15 6.08 Debt equity 0.25 0.47 0.32 0.35

18. Basic EPS has seen a positive growth from negative Rs.5.5 per share to Rs.0.9 per share in FY 17-18 to Rs.9.32 per share in FY 18-19 to Rs.16.5 per share in FY 19-20. Stronger and healthy EPS growth is what lucrates investors. Book value per share has increased by Rs.34.05 per share in FY16-17 to Rs.34.98 per share in FY 17-18 to Rs.44.77 per share in FY 18-19 to Rs.61.59 per share in FY 19-20. Enhanced book value depicts the intrinsic strength of the entity PBIT margins show increase from negative 5.15% in FY 16-17 to 1.78% in FY 17-18 to 7.21% in FY 18-19 to 11.68% in FY 19-20. Increased Profitability shows enmity's ability to remain competitive against its peers. ROE has also increased from negative 16.29% in FY 16-17 to 2.57% in FY 17-18 to 20.8% in FY 18-19 to 26.74% in FY 19-20. This indicates that entity has been providing good capital appreciation to investors on their stake held in the entity

19. ROCE has increased from negative 12% in FY 16-17 to 5.72% in FY 17-18 to 20.89% in FY 18-19 to 30.84% in FY 19-20. This indicates that the entity has been very efficiently utilising its investor’s money . Asset turnover ratio had increased from 117.48% in FY 16-17 to 148.11% in FY 17-18 to 143.52% in FY 18-19 to 148.06% in FY 19-20. This indicates an increased ratio at a decreasing rate which show that entity is yet to more effectively utilize its assets for generating revenue. Debt Equity ratio had been quite favourable in all the years under review which indicates that entity has a well balanced mix of debt equity in its capital structure

20. Issue size is Rs.1176 crores which comprise of fresh issue of Rs.300 crores and Rs.876 crores of offer for sale by selling shareholders The offer includes reservation of up to 70000 equity shares for subscription by eligible employees of the entity at a discount of Rs.148 per share . The proceeds of issue will be utilized as follows- a] Rs.150 crores towards capital expenditure for expansion of existing manufacturing facility at Pudukkottai Tamilnadu by setting up an additional unit adjacent to existing facility b] Rs.50 crores for purchase of machineries and gyroshakers c] Rs.25 crores for Repayment or prepayment of borrowings so far taken by the entity IPO Information

21. d] Balance of funds to be utilized for corporate purpose. Issue open date- 20/01/2021 Issue close date- 22/01/2021 Issue allotment date- 28/01/2021 Date of refund of excess sum- 29/01/2021 Date of credit to Demat A/c- 01/02/2021 Date of listing – 02/02/2021 Offer Price Band- Rs.1488-1490 per share Lot size- 10 equity shares per bid Issue type- Book Building Issue

22. IPO lead managers- a] Edelweiss Financial Services Ltd. b] ICICI Securities Ltd c] Kotak Mahindra Capital Ltd The share price post IPO has been trading at 60% premium over upper band issue price The shares had been subscribed by 117 times