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  • Writer's pictureShekhar Yadav

Indigo Paints Ltd- Q4FY21 Analysis

Updated: Jun 30, 2021

Indigo Paints Ltd, the 5th largest paint company in India came out with its Q4FY21 results. While the growth momentum continues, the profitability margins were hit by high raw material cost. 

You can read about the company and my IPO note on the same here: Indigo Paints Ltd- IPO Review

In the blog ‘Indigo Paints Ltd- Q4FY21 Analysis’, I will cover:

  1. Financial Analysis of the company between 2012-21

  2.  Indigo Paints Ltd- Q4FY21 Financial Analysis

  3.  Factors helping Indigo Paints grow


Indigo Paints Ltd- Financial Analysis (2012-21)

Indigo Paints Ltd- Financial Analysis (2012-21)​

As you can observe that the sales of the company has grown at a CAGR of almost 39% between 2012 and 2021, much faster than the industry growth rate of around 12%. Thus multiplying the revenue by almost 20 times.

Whenever any company grows faster than the industry there is always market share capture. 

The Operating profit margin(Line item #6) and Profit margin growth(Line item #11) is much more impressive.

The company also has consistently generated higher Cash flow from operation(Line item #12) than profits.

With branding comes the negotiating power, as is visible in the cash conversion cycle(Line item #20) since FY15 which turned negative.

Also, the company has been consistently adding assets(Line item #13) to keep its growth momentum going.


Indigo Paints Ltd- Q4FY21 Analysis

Indigo Paints Ltd- Q4FY21 Analysis ​

During the quarter, the company continued its growth momentum growing at 41%.

Raw material cost has been increased since Q3FY21. Despite sharp increase in raw material(a jump of 5% year on year), the company continued its ad spend due to IPL in this quarter which hit the bottom line. Given the small size of the company the hit on bottom line is much more apparent.

There was industry wise price increase on May 01,2021 to compensate for the raw material price increase.


Factors helping Indigo Paints grow:

As I had mentioned in my previous blog that there are strong entry barriers in the Indian Paint industry. So, any company to grow has to come up strategies different that the market leaders:

  1. Management of the company brands all their products under one brand name that is ‘Indigo Paints’. Larger brands have 10-12 different brand name for different product categories.

  2. The primary reason for maintaining one brand name was to reduce the advertisement cost.

  3. In all their advertisement, they include the Brand name with the product/category name to create better brand recall such as ‘Indigo PU Paint’, ‘Indigo Bright Ceiling Paint’, ‘Indigo Acrylic Paints’  etc

  4. In terms of choosing the brand ambassador, they chose ‘M S Dhoni’ over bollywood stars as cricket have much more wider acceptance than bollywood star.

  5. Company is getting into products where the competition is less.  For eg. Pouch Distemper which is sold in 1 kg pouches sells a lot in rural areas. Most of the larger players have exited that market as they don’t find it lucrative.  Indigo paints is focusing on that area.

  6. Other strategies of differentiation is that they are focusing on product categories where the market size is ₹50-60cr where larger players will not invest additional bucks.

  7. Focusing on very differentiated product categories. Almost 30% of sales comes from differentiated products where the company is able to increase prices pertaining to any cost increase. That also enables them to have the Highest Gross margin in the industry. 

  8. Post achieving the initial scale and the investment by Sequoia capital, the company started advertising aggressively since 2014. While larger companies invest 2-3% of sales towards advertisement, Indigo spent 10%.  



Following the above strategies Indigo Paints have been able to grow faster than the industry. Now the brand is well known.

Coming to the recent result, the company continued its rapid growth and have committed to outperform the industry growth. In the next 5 years, the company wants to be the #3 player from #5 currently.

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