On Friday, September 6, Indigo Paints saw its shares drop by 3.5%, trading at ₹1,485.65 per share on the Bombay Stock Exchange (BSE). This came after reports surfaced that 1.2 crore shares, representing 25% of the company's equity, were exchanged in a major block deal. The trade occurred at an average price of ₹1,493 per share, with the total value of the transaction pegged at ₹1,792 crore.
The block deal details
Earlier reports indicated that Peak XV Partners Investments, previously known as Sequoia India, initiated this block deal to sell a part of its stake in Indigo Paints. The block deal was reportedly aimed at raising between ₹750 crore and ₹800 crore. The base price for the block deal was fixed at ₹1,470 per share, a 4.6% discount compared to Indigo Paints' closing price on September 5.
Jefferies, a global investment bank, advised on the deal, ensuring smooth execution. This sale reduced Peak XV Partners' stake, which stood at 25.23% prior to the transaction. For investors interested in investing in the stock market, such large block deals often signal strategic shifts, offering potential opportunities or risks depending on market conditions.
Indigo Paints financial performance
Indigo Paints has faced mixed financial results, which could influence future decisions for those looking at investing in the stock market. In the first quarter of FY25 (Q1 FY25), the company reported a net profit of ₹26.20 crore, reflecting a 15.59% decline from ₹31.04 crore in the same quarter last year. Despite the profit drop, revenue from operations grew 7.81% year-on-year, reaching ₹310.96 crore in Q1 FY25.
Despite this revenue growth, Indigo Paints faced challenges in other financial areas. The company's profit before tax dropped 15.70% from ₹42.34 crore in the same quarter last year to ₹35.69 crore this year. Furthermore, its EBITDA (earnings before interest, taxes, depreciation, and amortisation) fell 3.46%, standing at ₹47.4 crores compared to ₹49.1 crores in Q1 FY24.
Stock market performance and company growth
Indigo Paints made a memorable debut on the stock market in 2021. The company’s shares were listed at a 75% premium to their issue price of ₹1,490 per share, with the stock price eventually rising by 9.3% to close at ₹3,118.65. Investors flocked to the company’s Initial Public Offering (IPO), which was subscribed a staggering 117 times, indicating the strong demand and investor confidence in Indigo Paints at the time.
Since its incorporation in 2000, Indigo Paints has grown into one of India’s top five paint companies. Its primary focus is on Tier-III and IV towns and rural markets. Its strategy of catering to underserved markets has allowed it to expand rapidly, making it a preferred choice for investing in the stock market.
The company operates three major manufacturing facilities in Jodhpur, Kochi, and Pudukkottai, with a licensed capacity of 1.02 lakh kilolitres per annum. As of the fiscal year 2020, these plants had an average utilisation rate of around 48%.
Key takeaways
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