Indigo Paints at lifetime low, stock down 36% from 52-week high

Indigo Paints shares hit a record low of Rs 2,137, down 4% from BSE in intraday trading on Monday amid concerns over poor operational performance.

With today’s decline, the stock has corrected 36% from its high of Rs 3,348 reached 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 a price of Rs 1,490.

Indigo Paints is the fifth largest company in the Indian decorative painting industry by operating revenue for fiscal 2020 and the fastest growing among the top five paint companies in India. The company manufactures a full line of decorative paints including emulsions, enamels, wood coatings, tempera, primers, sealants and cement-based paints.

Over the past month, the stock has underperformed the market, falling 11%, after Indigo Paints released a disappointing set of numbers for the quarter ended September 2021 (T2FY22) mostly in terms of margin. In comparison, the S&P BSE Sensex was down almost 4%. Over the past three months, the stock has slipped 17%, compared to a 2% rise in the benchmark.

For the second quarter of fiscal 22, the company’s profit margin before interest, taxes, depreciation and amortization (ebitda) contracted by 586 basis points to 12.92% due to extremely high inflation in commodity prices. Profit after tax (PAT) decreased 28% year on year (YoY) to Rs 11.61 crore from Rs 18.81 crore. However, during the quarter, despite the delayed retreat of the monsoon and the heavy rainfall seen across the country in September, the company’s revenue rose 26.65% year-on-year to Rs 196 crore.

Due to an unprecedented escalation in commodity prices, the entire industry is experiencing a sharp contraction in gross margins and Indigo Paints has also been affected. However, due to proactive price increases, the effect on Indigo Paints was relatively weaker and the company ended the quarter with an industry-best gross margin of 41.72%, Indigo Paints said.

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