Interarch Building Products Company is coming up with its IPO fresh issue of Rs. 200 crores and offer for sale worth Rs. 400.29 crores totaling Rs. 600.29 crores, which will open on 19^th August 2024. The issue will close on 21^st August 2024 and be listed on the exchange on 26^th August 2024. In this article, we will look at Interarch Building Products IPO Review and analyze its strengths and weaknesses. Keep reading to learn about the company.

Interarch Building Products IPO – About the Company

The company was incorporated in 1983. It is a leading turnkey pre-engineered steel construction solution provider in India. They offer integrated design, engineering, manufacturing, and on-site project management services. The company ranks third in operating revenue among integrated PEB players in India in FY23.

The company’s PEB offerings cater to industrial, infrastructure, and building sectors. It has completed 677 PEB contracts from 2015 to 2024, demonstrating its experience in the field. The company operates four manufacturing facilities with a total capacity of 141,000 MTPA.

Interarch Building Products serves diverse customers and has long-standing relationships with many of them. Repeat orders account for around 80% of its operational revenue. The company’s brands such as “TRAC” and “TRACDEK” have been in the PEB industry for over 30 years.

The company has shown strong financial growth. Its revenue increased from Rs. 834.90 crore in FY22 to Rs. 1,293.3 crore in FY24. The order book grew from Rs. 841 crore to Rs. 1,153.3 crores during the same period. The company aims to expand its manufacturing capacity further.

About The Industry

India’s pre-engineered buildings (PEB) industry has grown steadily, reaching Rs. 19,500 crore in FY24. This growth is driven by increasing awareness of modern construction techniques and demand for green buildings. PEB structures offer advantages like cost-effectiveness, faster construction, and reduced environmental impact compared to traditional methods.

The industry outlook with projections indicating growth at 11-12% CAGR between the Financial Years of 2024 and 2029. This will likely push the market value to Rs. 33,000-34,000 crore by 2029. The factors supporting this growth include investments in industrial and infrastructure sectors, particularly warehouses, logistics, and expressways.

The Government’s focus on infrastructure development is also boosting demand for steel construction-related structures. PEB finds applications in various sectors, including metro stations, airports, telecommunication towers, and power transmission towers. The shift towards hub-and-spoke models in warehousing and the implementation of GST has further increased demand for large, modernised PEB structures.

Interarch Building Products IPO – Financial Highlights

Interarch Building Products reported revenue from operations of Rs. 1,293.30 crores in FY24, up 15.07% from Rs. 1,123.92 crores in FY23. Net Profits in FY24 were Rs. 86.26 crore, an improvement of 5.89% from Rs. 81.46 crore in FY23. There was an improvement in Material Costs and increase in revenue growth has contributed to its profit growth.

The earnings per share in FY24 was Rs. 58.68 per share which was a slight increase of 8.04% from the previous year’s Rs. 54.31 per share. The improvement in EPS due to better cost control from FY22.

Steel business is capital intensive and Interarch’s reserves are increasing and the debt to equity ratio in FY24 stood at impressive 0.03 compared 0.04 in FY23. 

The RoE is stood at 22.70% in FY23 and 20.44% in FY24. There was a slight decrease in returns due to higher increase  in reserves compared to the increase in net profits. The company’s RoCE was 25.79% in FY24 compared to 26.75% in FY23.

Interarch Building Products recognises its revenue from operations under supply, manufacturing, installation and erection of pre-engineered buildings, cladding systems, metal false ceilings and metal roofing. Most of their business is located in India. 

Interarch Building Products IPO – Key Players 

Interarch Building Products’ listed peers are Everest Industries Limited, and Pennar Industries Limited. Compared to its peers, Interarch’s revenue is lower than its peers. Interarch’s net profit margin stood at 6.67% compared to Everest’s 1.14% and Pennar’s 3.14% in FY24. Interarch’s margin is better than its peers.

The EBITDA margin of Interarch Building Products is around 8.74% in FY24, compared to Everest has 3.08% and Pennar has 8.72%. Interarch Building Products’s margins are in par with Pennar Industries margin. 

Interarch Building Products’s Asset Turnover ratio is 1.81 times which is comparbly better than its peers. Cash Conversion cycle of Interarch is around 65 days compared to Everest’s 88 days and Pennar’s 66 days. Overall, in some aspects Intraarch’s ratio has fared well compared to its peers. 

Strengths Of the Company

1. Market Position: The company holds a strong market position in India’s pre-engineered steel building industry. It ranks third in operating revenue and has the second-largest installed capacity among integrated PEB players in India.
2. Manufacturing Capacity: It operates four manufacturing facilities with a total capacity of 141,000 MTPA. These facilities can produce various PEB components and have quality certifications. The company’s vertical integration allows better control over production.
3. Execution record: The company has completed 677 PEB contracts from 2015 to 2024. This track record demonstrates its project execution capabilities. Its on-site project management team ensures timely completion of projects.
4. Customer Diversification and Retention: The company serves diverse customers across industrial, infrastructure, and building sectors. It has long-standing relationships with major clients. Repeat orders made up over 80% of revenue in recent years. Some of their clients include Grasim Industries, Berger Paints, Timken India and others.
5. Strong Financials: The company shows strong financial performance. Its revenue grew from Rs. 834.9 crore in FY22 to Rs. 1,293.3 crore in FY24. The order book increased from Rs. 841 crore to Rs. 1,153.3 crore in the same period.

Weaknesses Of the Company

1. Raw Material cost fluctuations: The company heavily depends on steel as a raw material. Steel prices fluctuate, that might affect the company’s costs. The company can’t always pass these price increases to customers, which may put pressure to its margins.
2. Manufacturing risks: The company’s manufacturing facilities are concentrated in Tamil Nadu and Uttarakhand. This might make the company vulnerable to local disruptions, natural disasters, or regional issues that could affect its operations.
3. Exposure to existing customers: The company relies significantly on repeat orders from existing customer groups. Loss of these customers or a reduction in repeat orders from existing customers could impact the company’s revenue and business growth.
4. Future Uncertainity: The company lacks long-term contracts with customers. They can cancel or modify orders, which might affect the company’s revenue and cash flow. This uncertainty makes business planning challenging.
5. Government Policy risk: The company’s business benefits from India’s National Steel Policy. If the government withdraws this policy, it could negatively impact the company’s operations and financial performance. 

Also read…

Interarch Building Products IPO – GMP

The shares of Interarch Building Products Ltd’s price in the grey market were trading at a 43.89% premium as of August 14^th, 2024. The shares in Grey Market traded at Rs. 1,295. This gives it a premium of Rs. 395 per share over the cap price of Rs. 900.

Interarch Building Products IPO – Key IPO Information

Promoters: Arvind Nanda, Gautam Suri, Ishaan Suri and Viraj Nanda.

Book Running Lead Manager: Ambit Private Limited and Axis Capital Limited.

Registrar to the Offer: Link Intime India Private Limited.

The Objective of the Issue

1. Financing the Capex for setting up a new PEB manufacturing unit planned in Andhra pradesh – Rs. 58.53 crore.
2. Capex financing for the upgrade of the Kichha Manufacturing facility in Tamil Nadu (Manufacturing facility 1 and 2) and Pantnagar unit – Rs. 19.24 crore.
3. Funding investment in information technology assets for upgrading existing infrastructure – Rs. 11.39 crore.
4. Funding working capital – Rs. 55 crore.
5. General Corporate Purposes.

Conclusion

Interarch Building Products is performing better based on repeated orders from existing customers and the strong financials can benefit their cause.

However, with the steel prices fluctuation and the risk of the Infra capex depends on government’s push. The company being the third largest in the PEB segment can increase their market share with high retention orders and increasing their customer base.

So what do you make of this company? Will it be able to increase its market share based on its competition with peers? What is your view? Let us know in the comments below.

Written by Santhosh

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.

The post Interarch Building Products IPO – GMP, Financials And More appeared first on Trade Brains.