Indigo Paints plans IPO of Rs 800-1,000 crore by next year

Indigo Paints, one of the leading paint companies in the country, is planning an initial public offer (IPO) within the next 12-15 months. The IPO is likely to be an issue in the range of Rs 800-1000 crore and will offer its private equity partner Sequoia Capital, which holds 38 per cent equity, an opportunity to partially or fully exit Indigo.

"We are looking at an IPO in the second half of next year and it is to catapult the growth into the next stage than fresh capital requirements for expansion," said Hemant Jalan, managing director.

He said the company, which posted Rs 596 crore turnover in 2018-19, has been growing at a compounded annual growth rate of 40-45 per cent over the last ten years, while the industry growth registered a CAGR of 10-14 per cent. Sequoia capital had invested Rs 50 crore in 2014, which was mainly used for creating brand equity. The second round of investment of Rs 90 crore in 2016 was utilised for acquiring Hi-Build Coatings, a key manufacturer of decorative paints and leaders in wood coatings in India. It had two units in Kochi and Pudukottai in Tamilnadu and was owned by a Middle East based national, who wanted to exit his investments in India. Indigo paid Rs 115 crore for the acquisition.  

India's paint industry, which constitutes decorative and industrial paints, has a size of Rs 40,000 crore. It is dominated by Asian Paints, Berger Paints, Kansai Nerolac Paints and Akzo Nobel. About Rs 10,000 crore market belongs to the unorganised players, which runs into 1000s of regional small scale companies. Jalan said Indigo is now present in 27 states and has manufacturing units in Jodhpur, Kochi and Pudukottai. Soon the company is planning entry into the markets of Himachal Pradesh and Jammu & Kashmir. Paint industry is not heavily capital intensive and average capex for Indigo is about Rs 50-60 crore.

About 30 per cent of products sold in the markets are innovative paints like floor and ceiling paints, which have first mover advantage. The company signed up with Mahendra Singh Dhoni as brand ambassador since last year for three years and that has helped in creating a pan-India brand equity. Indigo sells all its products under a single brand 'Indigo' unlike leading competitors. Paint industry's growth is heavily dependent on quality, promotion among public, painters and stockists. Indigo spends about 8-9 per cent of its total revenues on advertising as against the industry average of 1-3 per cent, said Jalan.

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