India’s growing investment in infrastructure has the potential to lead the growth path. Also, we are in the process of increasing the manufacturing abilities of the industrial sector. In this process, construction as a whole has become a crucial area. It comprises infrastructure, building and manufacturing construction.
Innovation is a driving factor for every industry. The pre-engineered steel construction is one such innovation, which has the potential to accelerate innovation in this industry. It is a technique to manufacture steel parts of buildings and assemble them on-site. Pre-engineered building (PEB) products offer flexibility and cost-efficiency advantages over traditional manufacturing.
Globally, the market of PEB products has increased from nearly 8% CAGR from 2019 to 2023. The Indian PEB products industry is also expected to grow at 11%-12% by 2029. Investors can be a part of this growth through the Interarch Building Products Ltd IPO. However, analysing an investment is crucial. Let’s explore the dynamics of this IPO!
Pre-engineered products
Construction is an age-old business. But its stream, pre-engineered steel construction (PEC), aligns with modern aspirations. It deals with manufacturing structures, which are later assembled on the site. These products and techniques have many benefits over traditional construction techniques. Currently, the PEC has only a 3-5% share in the overall construction industry, and this provides an opportunity for the companies to flourish.
The technique has many benefits over the traditional construction business. Eco-friendly production, capital-intensive, time-saving, and cost-effectiveness are some key highlights of this industry. The pre-engineered building (PEB) industry is expected to reach ₹340 billion by 2029.
All about Interarch Building Products Ltd
Interarch Building Products is one of the most seasoned and leading companies in the PEB industry. Established in 1983, it mainly deals in all three sub-sectors of construction. Steel structures, roofing, ceiling system, roofing and other non-industrial products have been their key products. These products are totally on a turnkey basis.
The company has some prominent customers such as Grasim Industries Ltd, Berger Paints Ltd, Timken India Ltd, etc. Its two in-house manufacturing plants, each located in Tamil Nadu and Uttarakhand, with an aggregate capacity of 1,41,000 metre tonne per annum (MTPA). Moreover, its three centres, located in Noida, Chennai and Hyderabad, are mainly indulged in the assembling and designing process.
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Interarch Building Products IPO
The company is raising the funds from the public for some specific purposes, such as:
- Capital expenditure for new PEB manufacturing unit in Andhra Pradesh.
- Capital expenditure for the upgradation of plants in Tamil Nadu and Pantnagar.
- IT system upgrade.
- General corporate expenses.
The registrar of this issue is Link Intime India Pvt Ltd. Its book-running lead managers are Ambit Pvt Ltd and Axis Capital Ltd.
| IPO start date | August 19, 2024 |
| IPO end date | August 21, 2024 |
| Price band | ₹850 – ₹900 |
| Lot size | 16 shares |
| IPO size | ₹600.2 crores |
| Fresh Issue | ₹200.0 crores |
Source: Interarch Building Products RHP
Interarch IPO GMP
The IPO’s GMP – grey market premium – is ₹325 at the start of day one i.e. August 19, 2024. The market anticipates its listing at ₹1,225. GMP is the indication of an investor’s confidence in a particular company. On NSE, the demand data for this IPO is also strongly growing.
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Key financials of the company
| Particulars | FY 2024 | FY 2023 | FY 2022 |
| Revenue from operations (₹ Cr.) | 1293.3 | 1123.9 | 834.9 |
| Net Profit (₹ Cr.) | 86.2 | 81.4 | 17.1 |
| Net Worth (₹ Cr.) | 387.5 | 343.7 | 262.6 |
| Return on Capital Employed (ROCE %) | 25.7% | 26.7% | 8.3% |
| Return on Equity (ROE %) | 19.4% | 20.4% | 5.3% |
Source: Interarch Building Products RHP
The company has constantly performed positively, in terms of its financials in the past three years. As of FY 2024, its earnings before Interest, tax, depreciation and amortisation (EBITDA) margin is 8.74%. The operating cash flow for the company has been positive for recent years. The net profit margin has also showcased positive growth.
A company related to manufacturing and infrastructure usually has heavy exposure to capital expenditure and debt, which is evident for Interarch Building Products Ltd. However, it is a positive prospect that ROCE has been positive and growing. The key ratios show promising capital expenditure for the company.
SWOT analysis
| Strength | Weakness | Opportunity | Threat |
| The deep-rooted customer base and experience of nearly 30 years in the industry give them an edge over competitors. | The sector is very new for countries like India and has started gaining momentum in recent years, which has some vulnerability. | Currently, the company is using only 40-50% approximate production capacity for all its plants. So, it has prospects of increasing its production without any other investment. | The main raw material for the production is steel. So, any vulnerability in its supply or prices would have a crucial impact on pricing. |
| The company has maintained a positive growth in its financials. Moreover, this early entry benefit to the trend can help the company establish economies of scale in the long term | Listed companies already present in this sector have comparatively better financials than the company. So, more efforts in terms of an increase in the production capacity and better financial management would be required. | The penetration of PEB products and construction companies in the overall construction industry, along with the growing inclination towards eco-friendly products, offers an excellent opportunity. | The requirement of heavy capital expenditure can potentially increase the company’s debt. |
Bottomline
There are fewer chances for investors to invest in such a unique and modern sector through IPO. The pre-engineered building (PEB) industry has cost-efficient, eco-friendly, modern, and capital-intensive solutions compared to traditional construction. Moreover, the company’s future growth prospects are very positive.
Interarch Building Products Ltd has been one of the leading companies in the industry. The company was established in 1983 and has developed a strong customer base in the industry. However, investors should thoroughly understand the IPO or take financial advice before investing.
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