Shalimar Paints Ltd. -- Worth a Serious Look -- Significant Rerating Triggers Inplace

Stock Opportunities Untested - but worth a good look
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Shalimar Paints Q2FY20 Earnings Call Highlights:

Participants:

  • M. Irani
  • Ashil Shah
  • Joindre Capital
  • Dharvesh Gupta
  • IndiaNivesh PMS

Business Overview:

  • Revenue at Rs 82.2 crore vs Rs 72.07 crore YoY
  • EBITDA at Rs 0.16 crore vs -Rs 6.28 crore YoY
  • Industrial paint volume increased 1% on yearly basis while decorative paint volume increased 35% YoY

ConCall highlights:

  • Industrial segment reported muted volume due to slowdown in the economy and extended monsoon; volume declined 25% on sequential basis
  • Company is getting very good response from Northern and Eastern part of the country
  • Shalimar has posted positive EBITDA during the quarter and aiming to be cash positive in next two quarters
  • Putty volume increased four times on yearly basis
  • Shalimar won’t increase the credit period to boost sales; debtor days likely to improve going forward
  • Fixed expenditure per annum is around Rs 100 crore (excluding interest Rs 75-80 crore). Variable expenditure is around 75% of total expenditure
  • Total debt as on date around Rs 130 crore; average rate of interest around 13.5%. Shalimar requests State Bank of India to reduce the interest rate; likely to see some reduction by end of this month
  • Nashik plant commenced commercial production in the month of September; capacity utilization will increase to 50% by end of Q4FY20
  • Plants are running at around 55% of installed capacity post the commencement of Nashik plant
  • Shalimar’s product price is around 3-4% lower than the industry average
  • Debtor days around 50-60 days; creditor days around 90 days; inventory days around 50 days. Six months down the line Shalimar will improve the inventory days to industry average of 30-35 days
  • Current working capital is around Rs 170-180 crore, which is sufficient enough to take the revenue to Rs 600 crore
  • Shalimar will receive Rs 40-50 crore of insurance claim in next 3-4 months; first tranches of Rs 18 crore will come in current month and another Rs 22-30 crore in next 3-4 months. Shalimar can increase the revenue to Rs 800 crore with this money
  • Steel tube sector is key customer for Shalimar in industrial paint category
  • Shalimar will move to new tax rate but the decision is still to be taken
  • Gross margin will improve to 34% in next two quarters from 32-32.5% currently
  • Logistic cost around 8% of sales which will improve by 50-100 bps as Nashik plant have become operational
  • Shalimar will spend around 1.5-2% of revenue on branding and advertising as fund is limited; industry average is around 7-8%
  • Number of new painters who tried Shalimar’s paint is doubling every quarter

Capex:

  • Shalimar has incurred around Rs 50 crore on capex for Nashik plant in H1FY20 (this include the expenditure incurred last year for the Nashik project); would incur another Rs 2-3 crore in H2FY20 for regular maintenance
  • No major capex plan for next financial year
  • Company can increase the revenue to Rs 1,000 crore with a minor capex of Rs 4-5 crore

Guidance:

  • Shalimar likely to report around Rs 400 crore revenue this financial year and Rs 500-600 crore in FY21
  • Company has guided 7-8% EBITDA margin for FY21
5 Likes
65

Shalimar Paints Q3FY20 Earnings Call Highlights:

Participants:

  • Ashil Shah
  • Nirmal Bang
  • OHM Portfolio
  • Sachin Shetty
  • Shiv Sagar Investment
  • IndiaNivesh Portfolio Management
  • Sekhar Mundra
  • Centrum Portfolio
  • Rajat Pandey
  • Equity Intelligence

Business Overview:

  • Shalimar Paints Ltd (SPL) has reported 20% revenue growth YoY during this quarter. Industrial grew 16% and decorative grew 23%
  • Company has been EBITDA positive for the last three quarters

ConCall highlights:

  • SPL has spent Rs 4 crore on branding during the quarter which has impacted the EBITDA margin
  • Though overall sales is growing at 25-30%, company is able to achieve 45-50% growth in South and West
  • East market is growing at 15-17%; freight cost is very high in eastern market as the company has no unit in that region
  • Nashik plant, which was under construction since September 2018 has been fully commissioned; company was able to produce 35-40% of installed capacity in Q3FY20
  • Fixed cost is almost under control; employee cost increased only due to addition of sales staff
  • Production of Chennai plant drops as Nashik plant starts catering in western market and some parts of eastern market
  • Expenditure on branding and advertising will continue to be limited for the company till company has become cash positive
  • Working capital: Inventory- Rs 75-80 crore; Debtors- 110 crore; Payable- Rs 75-80 crore
  • SPL has three plant with a capacity of 2000 KL each; but the company has environment clearance of only 1000 KL for Nashik plant
  • Company doesn’t need any equity capital or debt in the next 6-9 months to spur the growth
  • Debt level currently stands at Rs 120-130 crore
  • Company is expecting Rs 8 crore from insurance claim in next one month and another Rs 15-20 crore in next 6-8 months
  • Company will utilize the claim proceeds to pare debt as there is no need for working capital. Debt will be reduced by Rs 25-30 crore in next 6-8 months
  • SPL is primarily in economy range and average realization for decorative range is around Rs 100-110 per liter and for industrial it is around Rs 120-130 per liter
  • SPL has entered into premium paint segment in very a limited manner
  • As of now company is more focused on volume and not on margin as company has lot of underutilized capacity
  • Capacity utilization: Sikandrabad-80%; Nashik and Chennai at 35-40%
  • Sales staff cost will grow by 15-17% if revenue grows at 25-30%
  • Company is aiming to gain market share from small players as it is very difficult to gain market share from large players
  • Contribution of oil based paint is around 35-40% and water based around 60% for SPL
  • SPL currently adding 100-150 dealers every month; average revenue per dealer is around Rs 75,000 per month. Company is working to increase it to Rs 100,000 per dealer but it will take around 1-2 years
  • Company is working to improve the supply chain cost as SPL’s cost is much higher than other players

Capex:

  • SPL can achieve revenue of Rs 800 crore without any further capex and with minor capex of Rs 5-10 crore revenue can be increased to Rs 1,000 crore

Guidance:

  • SPL has guided 20-25% growth both for decorative and industrial segment
  • Company is trying to achieve cash positive as early as possible
  • SPL is targeting EBITDA margin of 7-8% in next financial year and in long run 10-12%
4 Likes
66

Why Shalimar paint is continuously making loss even all the paint companies are making good profit, fire broke out their plant and the damages happened in 2017 already recovered, Now a days, I think no major paints companies are incurred loss except this, As I remember management said FY 20 company will be in profit, but no major improvements

Disc. Holding since 2018

1 Like
67

Infra.Market decided to acquire roughly 25% of Shalimar Paints for Rs 270 crore (US$36 million) last week. Can this private equity investment bring glory?

2 Likes
68

Any new developments in shali? There is some bulk deal also.

69

The below article is a great read on the current developments in the company:

Some excerpts: (ALL CREDIT GOES TO ARTICLE OWNER)

  • Hell Infra is desperately trying to acquire the company
  • Shalimar Paints is doubling production capacity from 78 million litres to 180 million litres by modernising existing facilities. The capex earmarked for FY24 is ₹190 crores
  • New R&D facility in Nashik to support new product launches like wood coatings & waterproofing
  • More hiring in functions like sales, R&D and operations to support expansion
  • Increase marketing spends; 5% of annual sales (from < 2%)
  • Added 2,000 dealers in the last 5 quarters contributing 15% of sales

Shalimar Paints hopes to cross ₹1,000 crores in sales by FY27 (₹486 crores in FY23).

On a relative basis, Indigo Paints is currently where Shalimar Paints wants to be by FY28 (sales = ₹1,250 crores, EBITDA margin = 17%)

If I play it conservatively and assume an EBITDA margin of 12%, a back-of-the-envelope calculation extrapolates to a market cap of ₹4,500 crores by FY28 – a potential annualized stock price return of 28.6%

4 Likes
71

Sometimes we get over enthusiazed by external blogs and post. We only start seeing the positive side.

Infra market entry happened in Jan 2022.
Everyone now knows about this. They may try to acquire it.

From the post, it is clear that they are in preparation mode to expand and get good market share. Definitely good sign for any business.

Still we need to track sales number closely. Yet to see the positive light.

1 Like
72

can be tracked

2 Likes
73

I was really intrigued after reading the article by Mr Shankar Nath. Wanted to dig deeper to understand the capability and the track record of the management, specially Mr. Ashok Kumar Gupta who has done wonders with Jindal Stainless and APL Apollo Tubes.

There are two points which I am a little concerned about

  • In the interview - https://youtu.be/HgdbdmBBYfY?t=246 in Sept 2020, Mr Ashok Gupta talked about reaching 1000 Cr revenue in three years. Now there was another COVID wave after this so it would have definitely affected his plans. By march 21, there was revenue degrowth of ~5% and by march 22, they reported revenue growth of ~10%. Results begin to look good by March 23, where they reported revenue growth of ~35% (at 486Cr). The problem is, if you look at the end of dec quarter, FY 24, the revenue growth seems to have slowed down (TTM revenue is ~526 Cr.). At this rate it might be difficult to reach a 1000 Cr revenue even by FY 25. Is this a case of over-promising and under-delivering? I am not sure.
    It seems, the 1000 Cr revenue target was later revised and is now targeted for FY27 - Shalimar Paints hopes to cross Rs 1,000 crore topline in coming years, ET RealEstate

  • The company does not seem to have published earnings call recordings/ transcripts for Q2/Q3 FY '24 . (Or is it that I am unable to find them?). Is this a red flag? Would love to understand fellow investors point of view here.

Disc: Not invested, tracking

2 Likes
74

Good point and I was exactly gonna write the same.

I tried my best to find Q3 earnings ppt/ call transcript if any and could not find the same.

I did take a look at Infra.Market plans and tried to see whether they have anything mentioned but could not find either.

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Another point is that the industry leader Asian Paints it trading close to 3 yr lows. Most experts are pointing to new competition in the market (Grasim) as the reason which will erode the margins in the future.
I believe its going to be even harder for Shalimar paints to turnaround and generate value given such intense competition in this sector.

76

Massive buying from promoter , is this just a change of hands or actual buying in last quarter?

77

Shalimar paints is now owned by Hella Infra.
here is short note on hella -

About Hella Infra Market Unlisted Shares

Hella Infra Market Private Limited (HIMPL) is engaged in the business of manufacturing construction materials. The company offers concrete, steel, AAC blocks, walling solutions, wood, aggregates, electricals, pipes and fittings, R&D labs, construction chemicals, and more. The company markets its products under the brands IVAS and INICO. It has partnered with Ultratech, Havells, JSW, JCB, Godrej, Berger, and Unilever. HIMPL has more than 100 manufacturing units and over 4000 retail stores. The company was incorporated in 2016 and has its registered office in Thane, Maharashtra.

Overview of Hella Infra Market Unlisted Shares

Hella Infra Market Limited is a technology-driven construction solutions provider, transforming material procurement and delivery across India and beyond. With a strong focus on innovation, digital integration, and end-to-end supply chain efficiency, the company is redefining how infrastructure projects are executed.

  • Operates across 250+ manufacturing plants and warehouses, serving B2B, B2C, and B2R customers.
  • Offers 15+ product categories including concrete, steel, paints, plumbing, electricals, tiles, and modular interiors.
  • Leverages in-house platforms like Phoenix Sales Navigator, Field Force Automation App, and Phoenix Product Planner for real-time operations and supply chain control.
  • Focuses on private-label manufacturing to ensure cost efficiency, product consistency, and scalability.
  • Drives sustainable construction through eco-efficient logistics and material innovations.

Notable Projects: Trusted material partner for large-scale infrastructure projects like Mumbai Metro, Delhi-Meerut Expressway, and smart city initiatives. Active supplier to top real estate developers including Godrej Properties, Prestige Group, and Lodha Group.

Products

  • Structural Products: Concrete, Aggregates, Steel, Construction Chemicals, Cementitious Products.
  • Finishing Products: Walling Products, Pipe & Fittings, MDF/Plywood, Laminates, Roofing Products.
  • Lifestyle Products: Ceramics, Paints, Modular Kitchen, Designer Hardware, Fans, Lights, Appliances, Consumer Durables.
  • Others: Rental Equipment, Exterior Painting, Chemicals, Construction Services.

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INCOME STATEMENT

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Subsidiaries

Wholly Owned Subsidiaries (100% Shareholding):

  • Hella Infra Market Retail Private Limited
  • Hella Chemical Market Private Limited
  • Hella Infra Market Wood Products Private Limited
  • Sociam Equipment Solutions Private Limited
  • Hella Infra Market Pipes & Fittings Private Limited
  • Hella Infra Market Ceramics Private Limited

Foreign Subsidiaries (100% Shareholding):

  • Hella Infra Market Singapore Pte Limited (Singapore)
  • HIM Infra General Trading LLC (Dubai)
  • Sociam Singapore Pte Limited (Singapore)

Major Subsidiaries (Controlling Stakes):

  • Shalimar Paints Limited – 52.85%
  • RDC Concrete (India) Limited – 78.36%
  • Hella Infra Market Metal Private Limited – 68%
  • Hella Infra Market Steel Private Limited – 70%
  • Amstrad Consumer India Private Limited – 53.24%
  • Ivas Kadson Hardwares Private Limited – 68%

Litigation and Legal Issues

Income Tax Investigation (2022):
The company faced a significant legal challenge when the Income Tax Department conducted raids in March 2022.

Key Findings:

  • Undisclosed income: ₹224 crores across various assessment years
  • Bogus purchases: Evidence of accommodation entries aggregating over ₹400 crores
  • Seizures: ₹1 crore unaccounted cash and ₹22 lakh worth of jewelry
  • Investigation scope: 23 premises across Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, and Madhya Pradesh

Recent Developments and IPO Plans

Latest Funding (September 2025):
The company raised ₹731.5 crores ($83 million) in Series G funding.

  • Lead Investor: Silverline Homes (promoter entity) – ₹250 crores
  • NK Squared (Nikhil Kamath): ₹200 crores
  • Tiger Global: ₹176 crores
  • Other Participants: Accel India, Evolvence India, Nexus Ventures
  • Valuation: Maintained at $2.8 billion (flat from previous round)

So this is what i think-

  1. The paint industry is capex-heavy, and the smaller the company, the better it will perform in the future, as the numbers will grow at a rapid pace.
  2. They also have the support of Hella, which brings a strong distribution network and contacts to sell their paints to consumers.
  3. At the end, all paints are the same. It is the retailer whom we have to incentivize to sell our brand.
  4. Let’s track this company for a while to understand whether it is just a turnaround story or another Gensol.
  5. Hella is like a mall for infrastructure—whatever you need to build a project, they have the raw material required for it.
  6. So, the conclusion is that everything is in the hands of Hella now, and it depends on how they use their goodwill to prosper the sales of Shalimar.