IPO listed on 26 Aug'24
Interarch Building Products Ltd
Minimum Investment
₹ 14,400 / 16 shares
Grey market premium
₹ 325 (36% premium)
Issue price
₹ 900
Listing price
₹ 1,299
Listing gains
399 (44%)
Listing on
Aug 26, 2024
Our Verdict:
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- Interarch Building Products Ltd (IBPL) stands out in the pre-engineered steel construction industry with a robust balance sheet and outstanding return metrics, surpassing its industry counterparts. The company efficiently manages working capital, aligning with the industry standards.
- Even in terms of valuation, the IPO is reasonably priced with a Price-to-Earnings (P/E) ratio of 15x based on FY24 earnings. Furthermore, a notable grey market premium (GMP) signals the potential for a strong debut on the stock exchanges.
- Considering IBPL’s strategic positioning, impressive financial performance, strong industry tailwinds and reasonable valuations, investors may consider subscribing to the IPO from a long-term perspective.
About the company
Founded in
30 Nov'83
Managing director
Arvind Nanda
- IBPL stands as a leading provider of turnkey pre-engineered steel construction (PEB) solutions across India, equipped with extensive in-house expertise in design, engineering, manufacturing, and project management for the installation and erection of pre-engineered steel buildings.
- The company delivers its construction solutions through two primary channels: (i) PEB Contracts, offering comprehensive turnkey projects that include full on-site management for installations; and (ii) PEB Sales, which involves the distribution of building materials such as metal ceilings, corrugated roofing, and PEB steel structures.
STRENGTHS
- Dominant Market Position: With over 30 years in the PEB industry, IBPL holds a formidable market presence with the second-largest installed capacity of 141,000 MTPA as of FY24. It holds a market share of 6.5% based on operating income in FY24. From FY15 to FY24, the firm successfully executed 677 PEB contracts, showcasing its longstanding industry expertise.
- Impressive Growth: IBPL has exhibited a robust growth trajectory, achieving a compounded annual growth rate (CAGR) of 24% in operating revenue from FY22 to FY24. During the same period, its EBITDA and net profit witnessed remarkable rises, with CAGRs of 85% and 124%, respectively.
- Healthy Balance Sheet: Characterized by a strong balance sheet and positive operating cash flows, IBPL maintains low debt levels. The firm also boasts impressive return ratios, with a Return on Equity of 19.4% and a Return on Capital Employed of 25.8% as of FY24.
- Robust Order Book: IBPL’s order book increased to Rs 1,153 crore in FY24, up from Rs 841.04 crore in FY22, equating to 0.89 times FY24 revenue. This growth highlights its strong market standing and consistent ability to secure substantial projects, with the order count rising to 179 from 133 over this period.
- Customer Loyalty: The substantial repeat business, accounting for over 80% of revenue in FY24 and FY23, reflects IBPL’s enduring customer relationships with leading brands like Grasim Industries, Berger Paints, and Timken India. Notably, three of the top five customers have been with the company for over five years.
- Capacity Expansion: To further its growth, IBPL is constructing an additional PEB manufacturing unit at its forthcoming facility in Andhra Pradesh, where industrial land has already been allocated. This new facility will boast a capacity of 40,000 MTPA and is slated to become operational by the end of FY25, contributing to revenues from FY26 onwards.
RISK FACTORS
- Customer Concentration: IBPL's reliance on its top five customers, who account for 25% of its revenues, poses a risk. A reduction in business from any of these key customers could adversely affect the company’s profitability.
- Highly Competitive and Fragmented Market: The PEB sector is marked by intense competition and fragmentation, with numerous small, unorganized players making up about 55-60% of the market as of FY24. IBPL may face challenges in competing effectively against these entities, which could negatively impact its business outcomes.
- Industry Cyclicality: IBPL’s revenue and profit margins are subject to fluctuations due to the cyclical nature of steel, the primary raw material used in their products. This volatility can lead to unpredictable financial results.
Issue details
Issue type
Mainstream
Issue size
₹ 600.29 crore
Fresh Issue
₹ 200 crore
OFS
₹ 400.29 crore
Price range
₹ 850 - 900
Lot size
16 shares
Issue Objective
IBPL intends to utilise the proceeds from the net issue towards for the following purposes:
- Funding capital expenditure for the construction of a new PEB manufacturing unit;
- Allocating funds for the enhancement of the Kichha Manufacturing Facility in Tamil Nadu;
- Investing in information technology assets to upgrade its existing IT infrastructure;
- Providing for its incremental working capital needs; and
- General corporate purposes.
Dates
Bidding open
19 Aug'24
Bidding close
21 Aug'24
Allotment date
22 Aug'24
Refund date
23 Aug'24
Listing
26 Aug'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2024 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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