Shares in Indigo Paints Ltd jumped 84% in their market debut on Tuesday after a bumper response to the Indian paint maker's $160 million initial public offering (IPO) last month, underscoring investor confidence in the sector as the economy recovers.
Indigo Paints opened at Rs 2,607.5 ($35.71), a 75% premium to its issue price of Rs 1,490, and rose to as much as Rs 2,747, boosted by market euphoria following the federal budget on Monday, which included a proposal to extend a tax holiday for low-cost housing projects.
The Indian paint industry is valued at about Rs 54,500 crore and is expected to grow to Rs 97,100 crore by 2024, according to the company's prospectus.
Conglomerate Grasim Industries Ltd announced its foray into the paint industry last month, with a Rs 5,000 investment, citing robust outlook for the organized sector.
India has seen robust responses to consumer-focused IPOs and market debuts in recent months, as the stock market galloped to record highs on strong foreign inflows, boosted by coronavirus vaccine hopes and abundant liquidity in global markets.
Investors bid for 117 times the shares on offer in the Indigo Paints' initial public offering, where it issued new shares worth Rs 300 crore and existing investors, including Sequoia Capital India Investments, sold stake worth Rs 870 crore.
Pune-based Indigo Paints clocked a 78% jump in profit for the year ended March 31, 2020, on revenue growth of 16.6%, according to its prospectus.
The company will use proceeds from the IPO, which ran from Jan. 20-22, to fund the expansion of a manufacturing facility in the southern state of Tamil Nadu, purchase equipment and repay debt.