review on Indigo Paints IPO

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

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

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

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…

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
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

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