INDIGO PAINTS IPO
(ZEE BUSINESS)
|
BASIC DETAILS ABOUT IPO (20-21 January) |
|
|
Price Band |
1488-1490 |
|
Bid Lot |
10 shares |
|
OFS (Amount)- AT Upper Band |
870.2cr |
|
OFS (Shares)- Cr |
0.58 |
|
Fresh Issue- AT Upper Band |
300cr |
|
Fresh Issue (Shares)-Cr |
0.20 |
|
Total issue amount- AT Upper Band |
1170.2 |
|
Post issue Implied Market Cap |
7092.4cr |
|
Post issue (Shares) Cr |
4.76 |
|
Book Running Lead Manager Kotak Investment Bank, Edelweiss , ICICI securities |
|
|
SHAREHOLDING |
||
|
Particular |
Pre-Issue |
Post-Issue |
|
Promoter |
60.05 |
54% |
|
Institution |
38.95 |
37.3% |
|
Public |
1% |
8.7% |
|
Total |
100% |
100% |
|
BASIC FINANCIALS
(P&L) |
||||
|
(Amount in cr) |
1HFY21 |
FY20 |
FY19 |
FY18 |
|
Revenue From Operation |
259.4 |
624.8 |
535.6 |
401.4 |
|
Growth |
-4.8% |
16.7% |
33.4% |
- |
|
PAT |
27.2 |
47.8 |
26.9 |
12.9 |
|
PAT Margin |
10.5% |
7.7% |
5.0% |
3.2% |
|
COMC |
123.8 |
321.1 |
296.5 |
221.6 |
|
COMC % of RFO |
47.7% |
51.4% |
55.4% |
55.2% |
|
Other Expenses |
54.1 |
170 |
146.6 |
107.7 |
|
Other expenses % of RFO |
20.9% |
27.2% |
27.4% |
26.8% |
|
BASIC FINANCIALS (Balance
sheet & Cash Flows) |
||||
|
(Amount in cr) |
1HFY21 |
31.03.20 |
31.03.19 |
31.03.18 |
|
PPE |
140.1 |
142 |
86.4 |
61.4 |
|
% of Total assets |
34.1% |
33.6% |
23.2% |
20.6% |
|
Inventory |
67.3 |
76.8 |
69.3 |
55.2 |
|
% of Total Assets |
16.4% |
18.2% |
18.6% |
18.6% |
|
Trade receivable |
85.6 |
104.5 |
103.9 |
96.8 |
|
% of Total Assets |
20.8% |
24.8% |
27.8% |
32.5% |
|
Equity |
224.4 |
197.1 |
147.5 |
127.5 |
|
% of Total Liabilities |
54.6% |
46.7% |
39.5% |
42.9% |
|
Borrowing |
19.3 |
39.2 |
51.6 |
31.5 |
|
% of Total Liabilities |
4.7% |
9.3% |
13.8% |
10.6% |
|
Trade Payable |
119.1 |
138.6 |
136.2 |
108.5 |
|
% of Total Liabilities |
29% |
32.8% |
36.5% |
36.5% |
PEERS
|
Particular |
FY20 Revenue from Operation(RFO) |
Growth From FY18-FY20 Revenue |
FY20 PAT |
Growth From FY18-FY20 PAT |
PAT Margin |
Current market Share – decorative Paints |
|
Indigo Paints |
624.8 |
56% |
47.9 |
2.71x |
7.7% |
2% |
|
Asian Paints |
20211 |
20% |
2275 |
32.7% |
13.4% |
42% |
|
Berger Paints |
6366 |
23.2% |
658 |
42.7% |
10.4% |
12% |
|
Kansai Nerolac |
5280 |
13.4% |
521 |
1.4% |
9.9% |
7% |
|
Akzo Nobel India |
2662 |
-2.1% |
237 |
-40.8% |
8.9% |
5% |
|
Others |
|
33% |
||||
|
TOTAL |
|
100% |
||||
Based on Earnings for FY20 data as on 31 March 2020.
|
Particular |
PE |
PB |
RoNW |
Book Value |
|
Indigo Paints |
148 |
36 |
24.3% |
41.4 |
|
Asian Paints |
97.5 |
15.8 |
27.4% |
105.6 |
|
Berger Paints |
115 |
18 |
24.7% |
27.4 |
|
Kansai Nerolac |
64.2 |
5.6 |
13.7% |
69.8 |
|
Akzo Nobel India |
47.4 |
8.1 |
19.2% |
271.9 |
|
Industry Average |
81.0 |
11.9 |
21.3% |
118.7 |
TTM Data
|
Particular |
PE TTM |
PB TTM |
RoNW |
Book Value |
|
Indigo Paints |
139 |
31.6 |
26.9% |
47.1 |
|
Asian Paints |
106 |
22.5 |
28.2% |
115 |
|
Berger Paints |
144 |
26.3 |
25.2% |
29.5 |
|
Kansai Nerolac |
91.7 |
9.2 |
14.2% |
70.4 |
|
Akzo Nobel India |
57.3 |
8.5 |
20.0% |
267 |
|
Industry Average |
100 |
16.6 |
21.9% |
120.5 |
Why INDIGO PAINTS IS DEMANDING HIGHER VALUATION:
·
CAGR Growth in Revenue from
FY10 to FY20 was 39.2% ( i.e. rose from 22.9cr to 624.8cr)
Ø For Asian paints 12.1% (i.e. rose from 6434cr to 20211cr)
Ø For Berger paints 13.3% (i.e. rose from 1829cr to 6366cr)
Ø For Kansai Nerolac 14.4% (i.e. rose from 1369cr to 5280cr)
Ø For Akzo Nobel 11.6% ( i.e. rose from 890cr to 2662cr)
·
Company’s Property Plant and equipment rose from 61cr as on 31 March 2018
to 142cr on 31 March 2020 that is growth of 1.3x, Net block of building rose
from 22.7cr to 61.7cr while Net block of Plant and machinery rose from 27.9cr
to 65.6cr within the same tenure.
·
Also Purpose of the fresh issue is
for expansion and repayment of debt by which company will become debt free
(Company has around 25cr of Debt + lease liability) so around 275cr will be
used for expansion of existing manufacturing facility in Tamil Nadu and setting
up additional unit adjacent to the existing facility while tinting machines
will also be purchased. (Managment in interview of Awaaz told 150cr will be
used in expansion, 25cr debt and remaing for Tinting machine and general
corporate purpose)
·
Company’s PAT margin rose from 3.2% in FY18 to 10.5% in 1HFY21, Thanks to
reduced Cost of material consumed as % of Revenue from 55% in FY18 to 47.8% in
1HFY21 and also thanks to reduced Advertisement expenditure in 1HFY21 to 6.6%
of Revenue which was as high as 12% around, So current Advertisement
expenditure is normal to the industry
and hence 10.5% pat margin seems to be likely sustainable .
·
So if 150cr capex is done it will take PPE to around 292cr from just 61cr
as on 31 March 2018. Company has fixed asset turnover ratio of 4.4x for FY20,
if applied same what we are looking at it Revenue of 1285cr while for FY20 it was
just 624cr a increase by 1.1x times.
·
If both the above two points are clubbed Revenue of 1285cr and PAT margin
of 10.5% , PAT comes at 128.5cr which translates into EPS of 27 and than PE multiple comes at 55x around while
the industry PE is 81x…that is at discount of 33%.
PRO’s
·
In 10 years from FY10 to
FY20 Revenue grew at a CAGR of 39.1% highest amoung it peers with profitability
got improved from 3.2% in FY18 to 10.5% in 1HFY21 thus business showed good
growth and also improvement in profitability.
·
The fresh issue will be used
for expansion , already in last 18month PPE expanded from 61cr to 142cr and new
capex of 150cr will take PPE to around 292cr, thus right use of money raised.
·
Company will become debt
free as will use money raised to repay the debt.
·
Company has made good
presence in market by its brand ambasadder Mahendra singh dhoni.
·
Company got incorporated in
2000 and its MD has 20 years of experience in paint industry previously was
associated with AF Ferguson & Co and did chemical engineering from IIT
Kanpur.
·
Institutional investor
Sequoi is offloding only some of its stake will still hold above 25% stake thus
shows considerable growth expected by them too.
CON’s
·
They still hold just 2% of
decorative segment market shares.
·
Valuation at TTM PE 139 or TTP PB 31 seems higly priced.
|
Particular |
PE TTM |
PB TTM |
RoNW |
Book Value |
|
Indigo Paints |
139 |
31.6 |
26.9% |
47.1 |
|
Asian Paints |
106 |
22.5 |
28.2% |
115 |
|
Berger Paints |
144 |
26.3 |
25.2% |
29.5 |
|
Kansai Nerolac |
91.7 |
9.2 |
14.2% |
70.4 |
|
Akzo Nobel India |
57.3 |
8.5 |
20.0% |
267 |
|
Industry Average |
100 |
16.6 |
21.9% |
120.5 |
Comparison with other players
|
Particular |
Last 10 years Revenue CAGR |
PB TTM |
Mcap/Sales TTM |
PE TTM |
PE As on 31 March 2020 |
Current PAT Margin 1HFY21 |
FY20 PAT Margin |
|
Indigo Paints |
39.2% |
31.6 |
12.4 |
139 |
148 |
10.5% |
7.7% |
|
Kamdhenu |
10.1% |
1.95 |
0.38 |
31** |
5.9** |
1.7% |
0.8% |
|
SIRCA |
*15.6% |
5.4 |
7.2 |
243 |
20.1 |
-10% |
18.5% |
|
Shalimar paints |
0.8% |
2.4 |
1.8 |
Loss |
Loss |
Loss |
Loss |
*5 year CAGR
** Exceptiona item removed
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