Indigo Paints IPO opens today, anchor investors put in Rs 348 crore; should you subscribe or not?

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Updated: January 20, 2021 9:26 AM

Among the marquee names that lined up to pick a stake in the decorative paints manufacturing firm include, government of Singapore, Nomura, HSBC, and even Goldman Sachs.

IRFCThe IPO closes today and is expected to be listed just a day after the Union Budget.

Sequoia Capital-backed Indigo Paints raised Rs 348 crore from 25 anchor investors just ahead of its initial public offering (IPO) opening today. Among the marquee names that lined up to pick a stake in the decorative paints manufacturing firm include, government of Singapore, Nomura, HSBC, and even Goldman Sachs. The issue will open from today for subscription, making it the second IPO of 2021 just after IRFC’s IPO that closes today. Indigo Paints is looking to raise Rs 1,170 crore from capital markets through the public issue of equity shares and listing the firm on the bourses.

Anchor Investors

Indigo Paints said it had allocated a total 23,35,020 equity shares to anchor investors at the price of Rs 1,490 per share. Among foreign institutional investors of Indigo Paints, Capital Group was the largest investors, buying 11.5% of the anchor investor portion for Rs 39.92 crore. Government of Singapore Investment Corporation picked up 4.9% of the shares for Rs 16.99 crore, Fidelity was allotted 4.0% of the shares for Rs 13.99 crore. Goldman Sachs, Nomura, Government Pension Fund Global, PACIFIC HORIZON INVESTMENT TRUST, HSBC, Stewart picked up 3.9% each. Among domestic investors were, SBI Mutual Fund, HDFC MF, ICICI Prudential MF, Kotak MF, and Nippon MF among others.

Also Read: Indigo Paints grey market premium surges over 50% ahead of IPO

Issue details

Investors can bid for shares of Indigo Paints from today at a price band of Rs 1,488-1490 per share, in a bid lot of 10 equity shares and multiple thereafter. The IPO is a mix of fresh issuance and an Offer For Sale (OFS) by existing shareholders. Post-issue, Promoter and Promoter Group shareholding will decrease to 54% from the current 60.05%, while public shareholding will increase to 46% from the current 39.95%. The fresh issue adds up to Rs 300 crore and the OFS will be worth Rs 870 crore. 

Valuation and Outlook

“At the higher price band of Rs. 1,490 per share, the company’s share is valued at a TTM P/E multiple of 102.7x (to its restated TTM EPS of Rs. 14.5), which is in-line to the peer average,” said domestic brokerage and research frim Choice Broking in its IPO note. The brokerage firm has a ‘Subscribe with Caution’ rating on the IPO. “Among the top-five players, Indigo Paints is the late entrant in the sector. However it has registered a business growth of around 42% CAGR in the last decade, which is almost 3x of the sector growth,” they added.

Also Read: IRFC grey market premium still weak; hope of blockbuster listing dashed?

IndiGo Paints has managed to rapidly grow its market share. “Issue is priced at 98.4x PE on a trailing basis in terms of fully diluted EPS, which we believe is quite reasonable by looking at the future growth prospects of the company,” said Keshav Lahoti of Angel Broking. Lahoti advises investors to ‘subscribe’ to the issue with a long-term and listing gains perspective.

(The recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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