Retina Paints coming with an IPO to raise Rs 11.10 crore

Retina Paints

• Retina Paints is coming out with an initial public offering (IPO) of 37,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 30 per equity share.
• The issue will open for subscription on April 19, 2023 and will close on April 24, 2023.
• The shares will be listed on SME Platform of BSE.
• The share is priced 3.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Gretex Corporate Services.
• Compliance Officer for the issue is Krishnamachari Ramu.

Profile of the company

Retina Paints Limited established in the year 2010 headquartered at Hyderabad, Telangana. The company is into manufacturing of Decorative Paints like Distempers, Primers, Wall Care Products, Emulsions, etc and further sell them to different Distributors. It sources its raw materials at present indigenously for manufacturing of Paints. Its water based paints are used for residential and for commercial buildings. It has recently introduced tinting machines in the company. The tinting machine comprises a plurality of colorant reservoirs containing colorant, one or more cleaning fluid supply conduits and one or more dispenser heads for dispensing colorant into a paint container.

The company works on B2B Business Model, it sells its products to the dealers and distributors and then they sell to the end customers. It has a huge network of Distributors in the markets of Telangana and Andhra Pradesh and it has also presence in Odisha for selling its product. It is having exposure to the markets of Telangana, Andhra Pradesh and Odissa. It competes with few of the major players from the Organized Market and few from the Unorganized Market in the Paint Industry. It already has water-based products in its basket, it is also aiming for oil-based products. Oil based products are applied on wood, iron, etc. With oil products, it will be able to increase its turnover substantially. After the issue, the company is planning to sell the products directly to the end customers too along with selling it to the Distributors.

The company to expand its operations have acquired the land measuring 7,500 Sq. ft. situated at Sy. No. 19, Rayaraopet Village and GP, Bibinagar Mandal, Yadadri-Bhongir Dist. Telangana. The land was purchased by the company in the year May 27, 2020. The company constructed the factory on the land and same was constructed and completed as on September 20, 2022.

Proceed is being used for:

• Working capital requirements.
• General corporate purposes.

Industry overview

The Indian paint industry has been witnessing a gradual shift in the preferences of people from the traditional whitewash to high quality paints like emulsions and enamel paints, which is providing the basic stability for growth of Indian paint industry. Besides, it is creating a strong competitive market, where players are utilizing different strategies to tap the growing demand in the market for a larger share. Moreover, rise in disposable income of the average middle class coupled with increasing investment on education; urbanization; development of the rural market; and various launches of many innovative products, like friendly, odor free, and dust & water resistant paints, are major drivers that are propelling the growth of the paint market in India.

The Indian paints and coatings market is expected to reach around $7,645 million by the end of this year, and it is expected to register a CAGR of more than 7% during the forecast period of 2023-2028. The COVID-19 outbreak had both short-term and long-term effects on several businesses, including a substantial impact on the construction industry, which is reflected in the market for paints and coatings throughout the country. As the government lifted limitations in 2021, the market began to grow steadily. Growing demand from the construction industry, coupled with recovering automotive industry, is driving the need for the market studied. On the flip side, fluctuation in raw material prices is estimated to hamper the market's growth. The use of nanotechnology in the paints and coatings industry is expected to offer various market growth opportunities during the forecast period.

Pros and strengths

It sells its products in Business to Business (B2B) category: It imports raw materials from outside India and it serves in the states of Telangana and Andhra Pradesh and its dealers are spread across various territories. It is looking for expansion of its products through the region of all over the South India. Even in the pandemic, it sustained business and it stayed afloat and made exponential gains in the market.

Double Quality Checks: The company is dedicated towards quality of its products, processes and input raw material. It adheres to quality standards as prescribed by its customers to meet the desired requirement; hence it gets repetitive orders from its buyers. Delivering Quality products on time is one of its prime objectives. It dedicates resources for quality assurance to ensure that quality norms are continually met. It also has quality control checks before any consignment of Raw material is accepted since it has a direct impact on the quality of Finished Product. The ability to consistently deliver high-quality products to customers is critical to its business. Quality control is ensured by strict adherence to work protocols, from the procurement of raw materials and through the various stages of production.

Providing high quality with local prices: The quality it provides through its products is very high compared to at the prices it sells them at. The quality is checked twice before selling them to the dealers. It gives importance to the quality much more because it is interested in selling the products with international quality and it tries to reduce its wastages and faulty products by keeping such quality checks while manufacturing the same.

Risks and concerns

There are no long-term supply agreements with its vendors / suppliers: its Business may be adversely affected if there is any disruption in the trading material supply or due to non-availability of trading material. It does not have written agreements with its vendors / suppliers and it operates on a purchase order system. There are no long-term supply agreements for the trading material. In absence of any such formal contract with its vendors / suppliers, it is exposed to the risks of irregular supplies or no supplies at all or delayed supplies or price variation which would materially affect its results of operations. In the event of any disruption in the supply or the no availability of material in the required quantity and of required quality from alternate source, the supply schedule to its clients may be adversely be affected impacting the sales and profitability of the Company.

Business substantially dependent on its key customers: it derives a significant portion of its revenues from a limited number of customers which operate in the paint industry. In the event any one or more customers cease to continue doing business with it, its business may be adversely affected. The loss of such customers may be caused mainly because of competition and technological advancements. There may be factors other than its performance, which may not be predictable, which could cause loss of customers. Further, any significant reduction in demand for its services from its key customers, any requirement to lower the price offered by these customers, or any loss or financial difficulties caused to these customers, change in relationship with the customers could have a material adverse effect on its business, result of operations, financial condition and cash flow. While it is constantly striving to increase its customer base and reduce dependence on any particular customer, there is no assurance that it will be able to broaden its customer base in any future periods, or that its business or results of operations will not be adversely affected by a reduction in demand or cessation of its relationship with any of its major customers.

Highly competitive business: The Indian decorative paint industry has historically been dominated by four major entities that had an aggregate market share of the market, as the industry presents significant entry barriers. These market entry barriers include the development of an extensive distribution network through long-term relationships with dealers, the ability to set up tinting machines with dealers, as well as significant marketing costs and the establishment of a distinct brand to gain product acceptance. It competes on the basis of the strength of its differentiated products, distribution network, brand recognition, and ability to populate tinting machines. As a result, to remain competitive in its markets, it must continuously strive to manufacture differentiated products, expand its distribution network, enhance its brand and improve its operating efficiencies.

Outlook

Retina Paints is into manufacturing of Decorative Paints like Distempers, Primers, Wall Care Products, Emulsions, etc and further sell them to different Distributors. The company works on B2B Business Model, it sells its products to the dealers and distributors and then they sell to the end customers. On the concern side, its Business may be adversely affected if there is any disruption in the trading material supply or due to non-availability of trading material. It does not has written agreements with its vendors / suppliers and it operates on a purchase order system.

The company is coming out with a IPO of 37,00,000 equity shares of Rs 10 each at a fixed price of Rs 30 per share to mobilize Rs 11.10 crore. On performance front, the company’s revenue from operations is Rs 647.25 lakh for the financial year 2021-22 as compared to Rs 685.98 lakh for the financial year 2020-21 representing a decline of 5.65% on account of decline in sales due to drastic rise in input cost. The company’s profit after tax increased by 149.35% to Rs 11.32 lakh for the financial year 2021-22 from Rs 4.54 lakh for the financial year 2020-21, reflecting a net increase of Rs 6.78 lakh due to aforementioned reasons.

Going forward, the company intends to explore and evaluate strategic acquisition and technology alliance opportunities to gain access to new clients and sectors, add new technology capabilities to its offerings that drive synergies with its existing business ventures. It will continues to strengthen the quality control processes for the products which it offers. The company intends to focus on adhering to the quality standards of the products. It aims to continue to maintain its focus on cost management, including its manufacturing capabilities to deliver growth has well as to achieve economies of scale.