Indigo Paints Named Top Pick͏ ͏by HDFC Se͏curities wi͏t͏h 19% Upsid͏e͏ as Capacity Expansion Meets Sector Revival

Mumbai, 10 Nov 2025: HDFC Securities has made Indigo Paints Ltd its top pick, giving a ‘Buy’ rating on the stock with the base case target price of ₹1,109 and the bull case price of ₹1,192. This estimate, representing an upside of 19% from the current market price of Rs 1,004, comes as the decorative paints industry expects demand revival led by macroeconomic tailwinds and a strong wedding season ahead.

From Ce͏ment Paint͏s to Ma͏rket͏ Leader: ͏A 25-Ye͏ar Grow͏th Story

Established in 2000 and having started with only one product, Indigo Paints has come a long way to become the fifth largest decorative paint company in India today. Today, the company has a diverse portfolio and strong presence in the market with 5 manufacturing units offering an annual capacity of 1,60,000 KL of paint and 1,38,000 MT of putty.

Its strategic choice to conquer Tier 3 and Tier 4 cities first has proven to be highly successful – the company has created an unprecedented distribution network of 18,914 active dealers and 11,656 tinting machines (across 54 depots around the country), which now acts as a launch pad for its aggressive push into urban markets.

Res͏ilient Q2 Performan͏ce Show͏cases Superi͏or ͏M͏argin Defence

Enduring a long monsoon and muted demand, Indigo Paints posted a resilient second quarter. Revenue increased 4.2% from the previous year to ₹312 crore, but the exceptional performance was in terms of profitability. A fall in raw material prices and an upbeat product mix towards premium products led to a 6.74% increase in gross profit to ₹139.7 crore, resulting in a 107 basis points rise in gross margin.

As a result, EBITDA rose 12.1% YoY to ₹46.5 crore, with margin expanding 106 bps to 14.9%, an͏d PAT jumped 10.9% to ₹25.1 crore. The company’s shift towards a more premium positioning was clear here, as the Emulsions business registered 7.0% value growth compared to 3.9% volume growth.

Strategic C͏ape͏x and P͏remi͏um͏isation Drive Fu͏ture Earnings Visibili͏ty

Indigo Paints is pursuing a large capacity expansion to capture the growth, with a new 90,000 KLPA water-based and 12,000 KLPA solvent-based plant in Jodhpur to be commissioned in H2FY26.

The putty brownfield expansion will result in doubling capacity to 276,000MTPA. The capacity increase complements its strategy of ‘premiumisation’; its differentiated products, such as Metallic Emulsions, account for 28.2% of revenue and are the main driver behind t͏he highest gross margin in the industry of 46.0%.

In addition, its acquisition of Apple Chemie is also driving strong growth in the waterproofing business, with 22.6% YoY revenue growth in Q2FY26.

Limi͏ted Effects from New Entrant; F͏avourable Economi͏c Underpins Op͏timism.

The analysis underscores that Indigo’s ingrained presence in non-urban markets meant that the impact from the entry of Birla Opus was not as severe as it was on some of its peers. The management is hopeful of a strong resurgence in demand in H2FY26 on account of bumper agriculture harvest, strong wedding season and higher discretionary spending. These are expected to translate into two-digit growth from Q4FY26, and high secondary sales and strong dealer collections are already indicating that.

The company’s industry-leading profitability, continued strategic expansion of its capacity, and demonstrated ability to withstand competition make it well positioned to capture the majority of the c͏yclica͏l͏ u͏pturn in the decorative paint industry, supported by broader economic tailwinds and by the expanding reach of its distribution.

Source: HDFC Securities, Pick of the Week

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