Indigo Paints management highlighted that lower competition in differentiated products (29% of revenue) drives zero discounting and hence 8-10 ppt higher gross margins vs rest of the product portfolio. In terms of reach/distribution expansion, Indigo Paints strategy is to enter into 1 new state every year and focus only on tier-3/4 towns in terms of adding dealers during the initial 5-6 years and only once these tier-3/4 towns are completely concentrated is when they would move to tier-2 cities for dealer expansion.
 
Indigo Paints also currently has no intention to enter into adjacencies like Waterproofing, Industrial Paints and Automotive Pants due to ample opportunity for growth in decorative paints. Indigo Paints management also clarified on succession planning that the promoter’s son who has returned from the US will be inducted into the Board soon. However, there is no plan to foster him into a leadership position as the promoter (Hemant Jalan) would like to work for at least next 10-12 years.
 

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

See Zee Business Live TV Streaming Below:

Indigo Paints Margins:
 
There is lower competition in the differentiated product portfolio which drove better pricing power and hence better margin. Gross margin in these product categories are 8-10 ppt higher than the rest of the product portfolio. For e.g. – while everyone in the market offers synthetic enamel paints, Indigo Paints offers PU-based enamel paint which has better sheen, coverage and durability and hence Indigo Paints sell it at a much higher premium over other brands.
 
Don’t expect Indigo Paints advertisement spends to increase in line with revenue growth and hence will see the benefit of operating leverage flowing in. Indigo Paints offers zero discount in their differentiated product which also aids in better margin.
 
Indigo Paints Advertisement and brand building:
 
All large paint players have 12-15 sub-brands. Indigo Paints is focused on having only 1 brand so that no matter which product you advertise benefits will accrue to the entire portfolio (just like Amul which is present in almost 15 categories, but all under one brand). Also, all other paint companies were advertising emulsion and Indigo Paints wanted to differentiate here and hence focused on advertising only their differentiated product. This helped in gaining visibility and brand recall as no one else was manufacturing and advertising these products.
 
Every paint company has Bollywood stars as brand ambassadors but Bollywood stars do not have strong appeal in the 5 southern states. This is why Indigo Paints went with MS Dhoni as brand ambassador who has deep connect/appeal across regions.
 
Indigo Paints Manufacturing:
 
Indigo Paints plans to remain in its existing 3 manufacturing locations for the next 5-6 years as they found it economical to have fewer plants and be closer to raw material source. Indigo Paints is the only company to make 100% in-house Putty.