Indigo Paints Ltd. was trading at a premium of more than 55 percent over its higher issue price band of Rs 1,490 per share in the grey market after the paint company announced its IPO on Wednesday.

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The stock was trading at a premium of Rs 840-850 per share, meaning the grey market speculates its value to be around Rs 2,340-2,330, according to IPO Watch.

The initial public offering (IPO) of Indigo Paints will hit the markets on January 20 and close on January 22, 2021. The Pune-based paint company is among the fastest-growing, top five paint companies in India.

The Rs 1170-crore IPO, further divided into a fresh issue worth Rs 300 crore and an Offer For Sale worth Rs 870 crore. The Sequoia Capital-backed company filed preliminary papers with SEBI for the IPO in November last year.

The fifth-largest paint company in the country will utilize the funds for expanding the manufacturing facility in Tamil Nadu and for purchasing tinting machines and gyroshakers and repaying borrowings.

Hemant Jalan, CMD of Indigo Paints, said that they are expecting a turnover of Rs 1,500 crore annually. He also said that the operating leverage will improve the margins going forward.

“There is some operational leverage that will continue to kick in for a very long period of time because we are still a relatively small player in a huge industry. We have miles to go before we catch up with the larger players. So, the operational leverage can only serve to improve the margins as we go forward,” he said in an interview with CNBC-TV18.

He also said that going forward the company will look at a shift towards premium products. “As a company grows and as its brand salience grows, there is a slight shift that happens every year in the product mix – a marginal shift towards premiumization in the product portfolio. As that happens that also tends to push the margins in an upward direction,” he said.

The company had reported a net profit of Rs 27.21 crore in the quarter ended September 2020, while it was Rs 47.28 crore during FY20.