Peak XV Partners transfers 11% stake to Indigo paints at Rs.770 crore

On Thursday, September 5, launched a significant block deal to sell an 11% stake in Indigo Paints Ltd, a Pune-based company. The move comes as part of Peak XV's efforts to reduce its holding in the company. According to sources familiar with the matter, the shares are being offered at a price of Rs.1,470 per share, which represents a 4.6% discount compared to the current market price, making it an attractive opportunity for potential buyers.

The total size of the deal is valued at Rs.770 crore, highlighting the substantial nature of the transaction. A block deal of this size usually attracts institutional investors, including mutual funds and private equity firms, as it provides a significant opportunity to acquire a large portion of shares at a discounted rate. 

Furthermore, sources revealed that as part of the agreement, a 90-day lock-up period has been imposed on the seller, restricting them from selling additional shares during that time. This lock-up period is often used to stabilize the stock price following a major transaction and prevent further dilution in the short term.

The sale of this stake by Peak XV Partners is notable, as Indigo Paints has been a growing player in the Indian paints market, known for its innovative marketing strategies and premium product offerings. The company's stock performance has drawn interest from various investors, and this block deal is likely to generate significant attention in the market.

Indigo Paints reported last month that it anticipates a 2% improvement in gross margins following price increases in July and early August. Hemant Jalan, the Chairman and Managing Director, noted that a 2% hike was applied on a weighted average basis across the company’s product range.

Jalan also highlighted that demand saw a strong rebound in July, with growth in the high teens—a trend not observed in the previous seven to eight months. However, he expressed caution, stating that it remains uncertain if this demand recovery will continue.

He added, "Will the demand resurgence sustain in the coming quarter? I’m not sure. We’ll have to wait and see. These are challenges the entire consumer-facing sector is facing. While there is talk of early signs of recovery, we need to be patient."

Indigo Paints reported an approximately 8% rise in revenue, reaching Rs.310 crore in the first quarter of FY25, but saw a 15% drop in profit to Rs.27 crore. During a post-earnings call, the management noted a slowdown in Kerala, a significant revenue contributor. Profitability was affected by industry-wide price reductions, with realisations slightly impacted by higher discounts in the region.

Shares of Indigo Paints Ltd closed at Rs.1,538.30 on the BSE, an increase of Rs.1.90 or 0.12%.