The Silicon Valley-based venture capital firm, an early investor in Apple, Google, WhatsApp and Airbnb among other technology firms, is likely to garner up to Rs 650 crore by selling 7-8% stake in the Indigo Paints IPO, which opened on Wednesday.
This is among the biggest IPO gains for Sequoia Capital, which will continue to hold at least 28% stake in the company post the share float.
The fund had invested around Rs 170 crore in the company in two tranches between 2014 and 2016, and owns roughly around 38% stake in Indigo Paints, according to the draft red herring prospectus filed with the Securities and Exchange Board of India (Sebi). Indigo Paints aims to raise as much as Rs 1,200 crore by selling shares in a price band of Rs 1,488-1,490 apiece. As of 4:00 pm, the IPO was subscribed 1.3 times on the first day of the bidding.
According to news reports, Indigo Paints shares were trading with a 54.36% premium over the IPO price in the grey market on Tuesday. The shares of the fifth-largest company in the decorative paint industry were trading at Rs 2,300, up Rs 810 from the issue price.
“This is one of the biggest IPO gains for a venture capital fund. And Sequoia will continue to hold a huge stake in the company post the issuance, making it an even bigger paper gain for them” a person with knowledge of the development said.
Some of the other big exits (partial and full) clocked by Sequoia in the non-tech space includes, Havells, PI Industries, Prataap Snacks, Equitas Small Finance Bank.
Indigo Paints’ anchor book was oversubscribed multiple times with the likes of Government of Singapore, Smallcap World Fund, Fidelity, Goldman Sachs, buying shares.
Founded by Hemant Jalan in 2000, Indigo Paints competes with major brands such as Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel among others.
According to analysts’ reports, Indigo Paints is the fastest growing amongst the top five paint companies in India with a market share of around 2%. It manufactures a complete range of decorative paints including emulsions, enamels, wood coatings, distempers, primers, putties and cement paints. It has a distribution network across 27 states and seven Union Territories with 11,230 active dealers.
The company said it will use part of the IPO proceeds to expand its manufacturing capacities at Pudukkottai facility in Tamil Nadu with a proposed expansion unit of 50,000 kilolitres per annum. The remaining fund raise will go to selling shareholders — Sequoia Capital and Jalan.
Indigo Paints has a strong presence in Tier III and IV towns and rural areas with a strong portfolio of differentiated products, with around 29 % of FY20 sales coming in from these markets.