Interarch Building Products IPO Review 2024: GMP, Subscription Status, Risks & Investment Analysis

The IPO (Initial public offering) of Interarch Building Products Ltd (IBPL), a leading turnkey pre-engineered steel construction (PEB) solution provider, commences on August 19 and concludes on August 21, 2024. The offering, carrying a Grey Market Premium (GMP) of 36% and showing a positive subscription response, seems promising. However, investors need a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

Interarch Building Products IPO Details

• Issue Size: 600.29 crore
• Fresh Issue: 200 crore
• OFS: 400.29 crore
• Price Range: 850 - 900
• Lot size: 16
• Minimum Investment Value: Rs 14,400
• Listing Date: August 26, 2024

Use of Proceeds

IBPL intends to utilise the proceeds from the net issue for the following purposes:

• Funding capital expenditure for the construction of a new PEB manufacturing unit and expansion of an existing facility;
• Investing in information technology assets to upgrade its existing IT infrastructure;
• Providing for its incremental working capital needs; and
• General corporate purposes.

Interarch Building Products IPO Subscription Status

By 2.30 p.m. on its first day of bidding, the IPO of Interarch Building Products Ltd had been subscribed 2.05 times, receiving bids for 95,36,896 equity shares against an IPO size of 46,53,341 crore shares. Leading the subscription surge were the non-institutional investors, who subscribed 4.8 times their allotted quota. Retail investors also showed strong interest, subscribing 2 times their reserved portion, while qualified institutional buyers had not yet participated.

Overview of Interarch Building Products Ltd

IBPL stands as a leading provider of turnkey 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.

Interarch Building Products Ltd Key Strengths

• Dominant Market Position: With over 30 years in the PEB industry, IBPL is a major player with the second-largest capacity of 141,000 MTPA and a 6.5% market share in FY24. The company has completed 677 PEB contracts from FY15 to FY24.
• Impressive Growth: IBPL has demonstrated significant growth, with a 24% CAGR in operating revenue from FY22 to FY24. EBITDA and net profit also grew impressively, with CAGRs of 85% and 124% respectively.
• Healthy Balance Sheet: IBPL maintains a healthy balance sheet with low debt and positive cash flows, boasting a 19.4% Return on Equity and a 25.8% Return on Capital Employed in FY24.
• Robust Order Book: IBPL’s order book increased to Rs 1,153 crore in FY24, up from Rs 841.04 crore in FY22. 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: Over 80% of FY24 and FY23 revenues came from repeat business, highlighting strong relationships with top clients like Grasim Industries, Berger Paints, and Timken India.
• Capacity Expansion: IBPL is constructing an additional 40,000 MTPA PEB manufacturing unit in Andhra Pradesh, which is slated to become operational by the end of FY25, contributing to revenues from FY26 onwards.

Interarch Building Products Ltd Risk Factors

• Customer Concentration: IBPL relies heavily on its top five customers, who contribute 25% of its revenue. A decrease in business from these key clients could significantly impact the company’s profitability.
• Market Competition: The PEB industry is highly competitive and fragmented, with small, unorganized players accounting for 55-60% of the market as of FY24. This environment may pose challenges for IBPL in maintaining its market position.
• Industry Cyclicality: IBPL’s financial performance is vulnerable to the cyclical fluctuations of steel prices, its primary raw material. These fluctuations can lead to unpredictable revenue and profit margins.

Interarch Building Products Ltd Valuation & Investment Recommendation

IBPL stands out in the PEB 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. Considering the firm’s strategic positioning, impressive financial performance and valuations, investors may consider subscribing to the IPO from a long-term perspective.

For a deeper dive into this IPO, explore: IPO Corner on Liquide

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