Indigo Paints: Founder-Led Compounder at a Reset Multiple

Mehul Bhatt of OysterRock Capital presented his in-depth investment thesis on Indigo Paints (India: INDIGOPNTS) at Asian Investing Summit 2026.

Thesis summary:

Indigo Paints is the #5 player in India’s $10 billion paints and coatings industry, which Mehul expects to grow at high-single-digit to low-double-digit rates to roughly $15 billion over the next four years. Founded in 2000 by Hemant Jalan (IIT Kanpur, Stanford, Chicago Booth) with a single cement-paint product, Indigo has grown into a five-plant, 28-state operation with 20,000 active dealers, 12,000 tinting machines, and 55 depots, serving an industry historically dominated by Asian Paints, Berger, Kansai Nerolac, and Akzo Nobel. Decorative paints account for ~75% of the market and benefit from shortening repainting cycles, urbanization, premiumization, and ongoing formalization, with organized share already at ~75% and rising.

Indigo built its base by targeting Tier 3/4/5 towns and rural India, fighting unorganized players rather than incumbents and initially generating ~75% of revenue from those markets. Product innovation in specialty decoratives—metallic emulsions, tile coats, ceiling coats—now contributes 25–30% of revenue at higher margins. From FY23 onward, the company has pushed into Tier 1/2 cities, which now contribute roughly two-thirds of revenue.

The thesis hinges on undiscounted change. The entry of Birla Opus disrupted industry pricing and trade discipline, compressing margins across the sector and producing a flat FY25 for Indigo (revenue of ₹13.4 billion, OPM of 17%). To defend profitability, management cut A&P spend from 8% to 5.5% of revenue. Mehul expects competitive intensity to rationalize as incumbents recalibrate, allowing Indigo’s distribution moat and product innovation to drive a return to industry-leading growth.

Near-term catalysts include the June 2026 commissioning of the Jodhpur water-based paint plant (90,000 KLPA) and the scaling of recently acquired Apple Chemie (51% stake), a construction chemicals and waterproofing business with B2B credentials on flagship infrastructure projects (MTHL, Atal Setu), currently at ₹50 crore (~$5 million) of revenue, targeted to reach ₹200 crore (~$20 million) within two to three years.

The shares recently traded at ₹780, a market cap of ₹38 billion, ~25x trailing earnings, ~16x EV/EBITDA, and 3.6x book—well below FY24’s P/E of 32 and a fraction of post-IPO multiples. The balance sheet carries negligible debt, ROCE of ~27%, and ROE of ~15%, with annual operating cash flow of roughly $25 million. Mehul’s view is that a return to low-teens revenue growth, combined with margin recovery toward the 17–19% range, sets up a favorable risk/reward as Indigo’s transition completes.

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About the instructor:

Mehul Bhatt is the Founder and Managing Partner at OysterRock Capital, a eight-year-old India-centric fund manager founded in Mumbai. The firm manages an onshore India fund and has Luxembourg and Mauritius vehicles where it accepts international investments for investing in Indian equities. OysterRock’s thesis of “Capturing Undiscounted Change” and capturing perception variance between businesses and markets are areas where the firm has seen extraordinary outcomes. The firm has compounded at > 18% over the last 8 years by identifying companies that are in transition and by combining deep analysis with “scuttle-butt”, it has seen success in companies like Gabriel India (9x), Laurus Labs (10x), and Polymed (4x). OysterRock also has an extraordinary advisory board made up of well-known Indian business leaders. The firm’s design, processes and actions are deliberate to align client interest which helps it to focus on making idiosyncratic investments with asymmetric long-term prospects. Previously, Mehul headed equity fund management at HSBC Asset Management in India and worked at Credit Suisse and Raymond James’ India business. Mehul is a mechanical engineer and a management graduate from the Indian School of Business.