Is this IPO worth your investment? Company achieves 124 per cent CAGR in net profit from FY22 to FY24

According to a CRISIL report, the company was ranked third in operating revenue from the PEB business in FY23 among integrated PEB players in India.

About the Issue

Interarch Building Products Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Financing the capital expenditure towards setting up a new PEB manufacturing unit

2. Financing the capital expenditure towards the upgradation of the Kichha Manufacturing Facility, Tamil Nadu Manufacturing Facility I, Tamil Nadu Manufacturing Facility II and Pantnagar Manufacturing Facility

3. Funding investment in information technology assets for upgrading the company's existing information technology infrastructure

4. Funding incremental working capital requirements

5. General corporate purposes

Promoter holding  

Arvind Nanda, Gautam Suri, Ishaan Suri and Viraj Nanda are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 87.53 per cent in the company.

Company profile  

Interarch Building Products Ltd is a leading provider of turnkey pre-engineered steel construction solutions in India. The company offers integrated services that include design and engineering, manufacturing, and on-site project management for the installation and erection of pre-engineered steel buildings (PEB).

The company provides pre-engineered steel buildings (PEBs) through both construction contracts and the sale of PEB materials, including metal ceilings, corrugated roofing, PEB steel structures, and light gauge framing systems.

From FY15 to FY24, the company completed 677 pre-engineered building (PEB) contracts. According to a CRISIL report, it was ranked third in operating revenue from the PEB business in FY23 among integrated PEB players in India. As of March 31, 2024, the company held the second-largest aggregate installed capacity of 141,000 metric tonnes per annum (MTPA) and a 6.5 per cent market share in operating income for FY24. The company's total order book stood at Rs 1,153.29 crore as of March 31, 2024.

Financials  

The company has demonstrated steady and strong growth over the past few years, achieving a Compound Annual Growth Rate (CAGR) of 24.57 per cent in revenue and 124.40 per cent in net profit from FY22 to FY24. In FY24, the company achieved an impressive Return on Equity (RoE) of 19 per cent and a Return on Capital Employed (RoCE) of 26 per cent.

Valuation and outlook 

The issue is priced with a P/BV ratio of 3.35 times, calculated using its Net Asset Value (NAV) of Rs 268.80 as of March 31, 2024. At the upper price cap, it is priced at a P/BV ratio of 2.55 times, considering its post-IPO NAV.  

When calculating the PE ratio for the company based on FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 15. Considering both valuation and returns, the company has significantly outperformed its listed peers.

According to a CRISIL report, the Indian PEB industry is projected to grow at a Compound Annual Growth Rate (CAGR) of 11-12 per cent from FY24 To FY29.

Given the industry's long-term growth potential, the company’s established brand presence, track record of completed projects, strong financial performance, and robust order book, we recommend that investors consider subscribing to the issue with a long-term perspective.