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Peak XV Partners plans to sell an 11% stake in Indigo Paints via block deals at ₹1,470/share, a 4.6% discount. The deal size is ₹770 crore, with a 90-day seller lock-in period.
Peak XV Partners has initiated the process of selling an 11% stake in Indigo Paints Ltd via a block deal, according to sources familiar with the development. The transaction, valued at ₹770 crore, is set to be executed at ₹1,470 per share, representing a 4.6% discount to the current market price.
This strategic sale highlights the growing investor activity in India's paints sector, as Indigo Paints continues to capture attention despite market challenges. The stake sale is significant in the company’s evolving ownership structure, with Peak XV Partners aiming to reduce its exposure in the firm.
The block deal involves the sale of approximately 11% of Indigo Paints’ total shareholding, which translates to a sizeable chunk of the company’s market capitalisation. The offer price of ₹1,470 per share reflects a discount of 4.6% compared to the current market price of the stock, positioning the deal as an attractive buy for investors seeking entry into the company at a reduced rate.
The total transaction size is pegged at ₹770 crore, making this a substantial deal in the paints industry. Additionally, as part of the agreement, a 90-day lock-in period has been imposed on the seller, preventing further sales by Peak XV Partners during this period.
Indigo Paints has recently experienced fluctuations in demand and profitability. The company reported an 8% year-on-year increase in revenues, bringing in ₹310 crore in the first quarter of FY25. However, the company’s net profit saw a 15% decline, dropping to ₹27 crore.
The dip in profitability is attributed to price cuts and increased discounts across the sector, with a notable slowdown in Kerala, a key revenue region for the company. Despite these challenges, demand for the company's products saw a resurgence in July, with high-teen growth, providing some optimism for the company moving forward.
The block deal comes at a time when Indigo Paints is navigating both opportunities and challenges in the market. The company recently announced price hikes in July and August, aiming for a 2% improvement in gross margins. However, Hemant Jalan, Chairman and Managing Director, expressed uncertainty about whether the demand recovery seen in July will persist in the coming months.
The broader consumer-facing sector, including the paints industry, is currently grappling with mixed market signals. While there are signs of recovery, companies like Indigo Paints are adopting a cautious outlook due to industry-wide headwinds such as price sensitivity and fluctuating demand patterns.
Peak XV Partners' decision to offload its stake in Indigo Paints via a block deal marks a significant event for the company and the paints sector. While Indigo Paints faces some profitability challenges, its strategic price adjustments and demand recovery could help stabilise its market position in the near future. Investors will be closely watching the company’s performance in the coming quarters to gauge the sustainability of its growth.
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