Indigo Paints at life-time low, stock down 36% from its 52-week high

Shares of Indigo Paints hit a record low of Rs 2,137, down 4 per cent on the BSE in Monday’s intra-day trade on concerns of weak operational performance.

With today’s decline, the stock has corrected 36 per cent from its high of Rs 3,348 touched on February 3, 2021. It was trading at its lowest level since its market debut on February 2, 2021. Indigo Paints had raised funds by issuing shares at price of Rs 1,490.

Indigo Paints is the fifth-largest company in the Indian decorative paint industry in terms of revenue from operations for fiscal 2020 and the fastest growing amongst the top five paint companies in India. The company manufactures a complete range of decorative paints including emulsions, enamels, wood coatings, distempers, primers, putties and cement paints.

In the past one month, the stock underperformed the market by falling 11 per cent, after Indigo Paints reported a disappointing set of numbers for quarter ended September 2021 (Q2FY22) mainly in margin front. In comparison, the S&P BSE Sensex was down nearly 4 per cent. In past three months, the stock has slipped 17 per cent, as against a 2 per cent rise in the benchmark index.

For Q2FY22, the company’s earnings before interest, taxes, depreciation, and amortization (ebitda) margin contracted 586 basis points to 12.92 per cent due to extremely high inflation in raw material prices. Profit after tax (PAT) declined 28 per cent year on year (YoY) to Rs 11.61 crore from Rs 18.81 crore. However, during the quarter, despite delayed monsoon withdrawal and heavy rainfall witnessed by the country in September, the company's revenue has grown by 26.65 per cent YoY at Rs 196 crore.

Due to unprecedented escalation in the price of raw materials, the entire industry is witnessing a steep contraction in the gross margins and Indigo Paints was also adversely affected. However, due to proactive price increases, the effect on Indigo Paints was relative lower and the Company closed the quarter with an industry leading gross margin of 41.72 per cent, Indigo Paints said.