If still investors want to buy, they can buy in the range of Rs 2,000-2,250 per share, according to Gaurav Garg.
Sunil Shankar Matkar
February 02, 2021 / 02:32 PM IST
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As the Union Budget boosted investor sentiment once again after a week of weak trade, Indigo Paints shares listed on bourses on February 2 with a stellar premium of 75 percent.
The listing premium is much higher than analysts’ expectations. The healthy subscription figure of 117 times and strong earnings growth also supported the listing price.
The stock rallied as much as 110 percent to hit an intraday high of Rs 3,129 on the BSE, which was also a 20 percent upper circuit over opening price. The stock was opened with a 75 percent premium at Rs 2,607.5 against issue price of Rs 1,490.
Experts now advise investors to book partial profits on listing day and hold some of the stock allotment for long term.
“The fundamentals of the company are strong. Investors with a short to long term view may hold on to their holdings,” Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol.
Indigo Paints enjoys early mover advantage in floor painting, with growing sale of differentiated products which yields higher margin. “We like the fact that company remain least affected during COVID-19 period (growth in sales & on EBITDA margin terms) as compared to peers due to extensive presence in small towns which might be one of the reason that led company outperform its peers during COVID times & now expanding faster into large cities,” Astha Jain, Senior Research Analyst at Hem Securities said.
She recommended booking partial profit on listing day if stock is available more than 50 percent premium to issue price and hold remaining quantity for long term horizon.
But investors who want to buy shares can avoid buying today given the much higher-than-expected listing.
On listing day for fresh buying, Astha Jain recommended wait.
Prashanth Tapse, AVP Research at Mehta Equities also advised investors to avoid buying Indigo Paints on listing day. “Post listing one can relook to accumulate Indigo Paints once valuations matches’ industry peers as we believe IPO valuations were aggressively priced compared to industry leaders. We will remain optimistic on Indigo’s long term growth prospects.”
If still investors want to buy, they can buy if it is available in the range of Rs 2,000-2,250 per share, according to Gaurav Garg.
Indigo Paints is the fifth largest company in Indian decorative paint industry in terms of revenue from operations in fiscal 2020. Company has created brand ‘Indigo’ on back of multi pronged approach strategies.
The company raised Rs 1,170 crore via public issue including fresh issue of Rs 300 crore which will be utilised for capacity expansion in Pudukkottai plant, purchase of tinting machines and retiring some borrowings on books.
Indigo Paints operates 3 manufacturing facilities in India, located in Rajasthan, Kerala and Tamil Nadu, with current installed production capacity at 1,01,903 KLPA and 93,118 MTPA as of March 2020.
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