Interarch Building Products

Third largest integrated PEB player

In-house design and engineering, manufacturing, supply, and onsite project management capabilities for the installation and erection of PEBs

Interarch Building Products (IBPL), promoted by Arvind Nanda and Gautam Suri, is a turnkey pre-engineered steel construction solution provider. It has integrated facilities for design and engineering, manufacturing, on-site project management capabilities for the installation and erection of pre-engineered steel buildings (PEB).

Incorporated in 1983, IBPL has transitioned from a supplier of PEB materials to a turnkey PEB solution provider. Products include pre-engineered steel building materials such as metal ceilings and corrugated roofing (comprising metal suspended ceiling systems (Trac), metal roofing and cladding systems (TracDek) and permanent and metal decking (lost shuttering) over steel framing (TracDek Bold-Rib). PEB steel structures comprise primary and secondary framing systems as well as complete PEBs, such as non-industrial PEB buildings for non-industrial use such as farmhouses and residential buildings (Interarch Life) for erection and installation by third party builders and erectors. Offering also includes light gauge framing systems.

Revenue from PEB contracts was 75.67% and PEB sales 23% in FY 2024.

Got 68.57% of the FY2024 revenue from the industrial and manufacturing sector, 30.53% were for infrastructure including warehouses and airports, and balance for residential, commercial and non-commercial buildings.

The in-house design and engineering team included 119 qualified structural design engineers and detailers end March 2024, with an average work experience of 7.66 years.

The aggregate installed capacity stood at 141000 tonnes per annum (mtpa), spread across its four manufacturing facilities, with two located at Sriperumpudur, Tamilnadu, and on each at Pantnagar and Kichha in Uttarakhand.

Total capacity utilization of the four plants stood at about 60.64% in FY2024. The capacity utilization of BU components, the key product, was 80.49%.

A PEB manufacturing unit is being set up in Andhra Pradesh, with machines being installed at the 20 mtpa capacity Phase I of the project. There are plans to set up 40,000 mtpa at the PEB manufacturing unit in Phase 2.

Delivered PEBs for projects ranging from multi-level warehouses toclients in the e-commerce, paints, and fast-moving consumer goods sectors. Supplied large-span PEBs for indoor stadiums and customers in the cement industry.

The Issue

The IPO comprises offer for sale (OFS) of 4447630 equity shares and fresh issue of equity shares, aggregating to Rs 200 crore. Of the OFS, sales by the promoter shareholders constitute 2650030 equity shares [Aravind Nanda 720000 equity shares, Gautam Suri 790000 shares, Ishaan Suri 539930 shares, Shobhana Suri 600100 shares] and entire stake of 1797600 equity shares by investor OIH Mauritius.

Object of the Issue

Of the net proceeds from the fresh issue, about Rs 58.533 crore will be used to financing the capital expenditure towards setting up a new 40000 mtpa PEB manufacturing unit in Phase II in Andhra Pradesh, Rs 19.246 crore towards financing upgradation of the Uttarkhand and Tamilnadu manufacturing facility I and II; Rs 11.392 crore towards upgradation of existing IT infrastructure; Rs 55.00 crore towards incremental working capital requirements; and general corporate purposes.

Strength

Established player in the Indian PEB industry with 30 years of market presence and successful track record of execution and completion of over 677 PEB contracts between FY215 and FY224.

Among integrated PEB players in India, ranked third in terms of operating revenue from the PEB business in FY 2023.

Caters to a wide spectrum of customers across industrial and manufacturing, infrastructure and buildings.

Revenue from repeat orders was over 80% in FY2024 and FY2023, reflecting the long-standing relationship of the company with many customers.

The PEB installed capacity is the second largest in the country.

Enjoyed a PEB market share of 6.5% in terms of operating income in FY2024.

The order book stood at Rs 1153.29 crore end March 2024, translating to 0.89 times FY2024 revenue.

The Indian PEB industry is expected to record a CAGR of 11-12 % over FY2024-29

Weakness

Demand for PEB is susceptible to cycles in the end-user industry.

Unorganized players accounted for about 55-60% of the Indian PEB industry in FY2024.

Manufacturing facilities are currently concentrated in Tamil Nadu and Uttarakhand.

Acquired a property (in Sector 57, Noida) from Intertec, a member of the Promoter Group, for a consideration of Rs 12 crore, in June 2024.

Susceptible to volatility in steel prices, the major raw material.The operating margins are also volatile.

Valuation

Consolidated re-stated revenue stood higher by 15% to Rs 1293.30 crore in FY 2024. But with the OPM contracting 80 bps to 8.7%, OP was up by 6% to Rs 113.02 crore. Eventually, Pat after MI grew 7% to Rs 87.15 crore.

The EPS for FY2024 on expanded equity at the upper price band is Rs 51.8. The P/E at the upper price band works out to 17.4 times. The company quotes at a P/BV of 2.3 times.

Companies that have a sizeable PEB business such as Pennar Industries and Everest Industries quote at a PE of 21.8 times and 124.1 times, respectively, of their TTM EPS for the period ended Jun 2024. Pennar and Everest Industries quote at a P/BV of 2.5 times and 2.8 times, respectively. However, they are not truly comparable.