Indigo Paints tanks 11%, hits new low; trades near IPO price of Rs 1,490

In the past one month, the stock underperformed the market by falling 24 per cent, after Indigo Paints reported a disappointing set of numbers for Q3FY22 mainly in margin front.

Shares of Indigo Paints continued to reel under pressure, hitting a new low at Rs 1,497.65, as the stock tanked 11 per cent on the BSE in Monday’s intra-day trade on concerns of weak earnings due to higher input cost and lower demand.

The stock of paint makers traded close to its initial public offer (IPO) issue price of Rs 1,490. The company had made its stock market debut on February 2, 2021. The market price of Indio Paints more-than-halved or down 55 per cent from its record high level of Rs 3,348 touched on February 3, 2021.

The company manufactures a complete range of decorative paints including emulsions, enamels, wood coatings, distempers, primers, putties and cement paints.

The paints industry has seen margins crunched by the spike in crude oil and gas prices since this is base raw material which accounts for a significant percentage of costs.

In the past one month, the stock underperformed the market by falling 24 per cent, after Indigo Paints reported a disappointing set of numbers for quarter ended December 2021 (Q3FY22) mainly in margin front. In comparison, the S&P BSE Sensex was down nearly 9 per cent. In the past six months, the stock has slipped 43 per cent, as against a 10 per cent fall in the benchmark index.

In Q3FY22, the company’s earnings before interest tax and depreciation and amortization (EBITDA) margin fell 45 bps at 14.57 per cent primarily due to reduction in gross margins, down 670 bps at 42.89 per cent, and higher A&P expenses. However, its revenue was up 26 per cent year-on-year (YoY), profit after tax (PAT) rose 29 per cent YoY and volume grew 16 per cent YoY in emulsions.

The management had said the unprecedented escalation of raw material prices across all categories in recent months has been matched with unprecedented price hikes by the industry in Q3FY22.

The company’s growth momentum has been strong, but high input cost pressures and risks of moderation in demand limit upsides to earnings, according to analysts.

At 10:42 am; the stock was down 8.5 per cent at Rs 1,531 on the BSE, as compared to a 3.2 per cent decline in the S&P BSE Sensex. A combined around 80,000 shares changed hands at the counter on the NSE and BSE.