Interarch Building Products IPO analysis

Interarch Building Products IPO will open for subscription on August 19, 2024, and close on August 21, 2024. We break down the strengths, weaknesses, and growth prospects of this non-conventional construction company to help investors make an informed decision. Interarch Building Products IPO in a nutshell Quality: During FY22-FY24, Interarch Building Products' average ROE and ROCE were 15.1 per cent and 22.2 per cent, respectively. Growth: Its revenue and net profit grew 24.5 and 124.4 per cent per annum, respectively, over FY22-FY24. Valuation: Post the IPO, the stock will be valued at a P/E and P/B of 17.4 and 2.5 times, respectively. Overview: Pre-engineered construction, a non-conventional method where building structures are prepared in the factories and assembled at the project site, is expected to gain traction due to its cost and time efficiency. The fact that it accounts for just 3-5 per cent of the overall construction sector (in FY24) works in favour of its growth prospects. However, sourcing high-quality steel, the main raw material used, from a few reputed suppliers like Tata Steel, JSW Steel, and SAIL reduces its bargaining power with suppliers. About Interarch Building Products Incorporated in 1983, Interarch Building Products operates in the integrated pre-engineered construction industry. It offers services in the design, engineering, and manufacturing of steel structures, as well as on-site project management for installation and erection. The company has four manufacturing factories in northern and southern India, with a capacity of 141,000 metric tonnes per annum. A portion of the fresh issue from the IPO will be used to upgrade these facilities. Between FY15 and FY24, Interarch executed 677 projects and boasts Berger Paints, Grasim Industries, and Timken India among its clients, making it one of the key organised players in this business. Strengths of Interarch Building Products Interarch is one of the top six players in the non-conventional construction industry that have grown at a faster pace (11.4 per cent) than the rest of the industry (7 per cent) between FY19-FY24. With a track record of over 30 years, Interarch boasts the second-largest manufacturing facility among the integrated pre-engineering building (PEB) players. This has helped the company undertake projects from clients like Berger Paints and Grasim Industries. Weaknesses of Interarch Building Products During FY22-FY24, the share of repeat orders in Interarch's revenue has risen from 58 per cent to over 81 per cent. Although repeat business is beneficial, for a small and fast-growing company like Interarch, this figure should be reducing. Such dependence on existing customers is a potential threat-if any key clients exit, it can hamper the company's revenue growth going forward. Interarch Building Products IPO details Total IPO size (Rs cr) 600 Offer for sale (Rs cr) 400 Fresh issue (Rs cr) 200 Price band (Rs) 850-900 Subscription dates August 19-21, 2024 Purpose of issue For capex, IT upgradation and working capital requirements Post-IPO M-cap (Rs cr) 1,497 Net worth (Rs cr) 588 Promoter holding (%) 59.9 Price/earnings ratio (P/E)