Marquee names like ICICI Prudential Mutual Fund, Mirae Asset Mutual Fund, Bajaj Allianz Life Insurance and WhiteOak Mutual Fund, among others, are expected to participate in the anchor book allocation of the initial public offer (IPO) of Interarch Building Products, said sources familiar with the development.
The IPO of Interarch Building Products Limited, a leading provider of turnkey pre-engineered steel construction solutions, is scheduled to open on August 19 and close on August 21.
Here are the key details of the IPO:
Price Band: The price band has been fixed between Rs 850 and Rs 900 per equity share with a face value of Rs 10. Investors can bid for a minimum of 16 equity shares and in multiples of 16 shares thereafter.
Structure: According to the red herring prospectus, the IPO comprises a fresh issue of shares worth up to Rs 200 crore and an offer for sale (OFS) of up to 44.5 lakh shares by the promoter group and investor-selling shareholders. At the top end of the pricing band, the OFS is valued at approximately Rs 400 crore. The OFS includes 7.2 lakh shares by Arvind Nanda, 7.9 lakh shares by Gautam Suri, 5.4 lakh shares by Ishaan Suri, 6 lakh shares by Shobhna Suri, and 18 lakh shares by OIH Mauritius.
ALSO READ: Interarch Building Products sets price band of Rs 850-900 a share for IPO
Purpose of the IPO:
The primary goal of the IPO is to provide an exit for investor group OIH Mauritius Ltd, which holds a 12.47% stake in the company. As per the IPO documents, Rs 58.53 crore will be allocated for capital expenditure to establish a new PEB manufacturing unit (Phase 2 of the capacity development plan at the planned Andhra Pradesh manufacturing facility).
Additionally, Rs 19.25 crore will be used to upgrade the Kichha, Pantnagar, and Tamil Nadu manufacturing facilities. Furthermore, Rs 10.97 crore will be invested in IT infrastructure upgrades, and Rs 55 crore will be allocated to meet incremental working capital requirements.
Financial Performance:
According to the red herring prospectus, the company's revenue from operations has grown from Rs 834.94 crore in the financial year ended March 31, 2022, to Rs 1,293.30 crore in the financial year ended March 31, 2024, representing a compound annual growth rate (CAGR) of 24.46%. The company's profit after tax increased to Rs 86.26 crore in FY24, up from Rs 81.46 crore in FY23 and Rs 17.13 crore in FY22.
IPO Allocation:
QIB Portion: Not more than 50% of the net offer.
Anchor Investor Portion: Up to 60% of the QIB portion.
Remaining QIB Portion: Allocated on a proportionate basis.
Non-Institutional Portion: Not less than 15% of the net offer.
Retail Portion: Not less than 35% of the net offer.
Employee Reservation: Up to Rs 2 crore.
Peers:
Interarch Building Products' listed peers include Everest Industries Ltd (P/E of 91.2) and Pennar Industries Ltd (P/E of 18.3). In FY24, Interarch posted a return on equity (ROE) of 20.4%, compared to 12% for Everest Industries and 3% for Pennar Industries.
Business Overview:
Founded in 1983, Interarch Building Products is a turnkey provider of pre-engineered steel construction solutions in India. The company offers integrated services, including manufacturing, design, engineering, and on-site project management for pre-engineered steel buildings (PEB). From FY15 to FY24, the company completed over 677 PEB contracts.
In FY23, Interarch ranked third among integrated PEB competitors in India by operating revenue and held a 6.5% market share in FY24. As of March 31, 2024, the company had an installed capacity of 141,000 metric tonnes per annum (MTPA) across four manufacturing facilities in Pantnagar and Kichha, Uttarakhand, and Sriperumbudur, Tamil Nadu.
Customer Base:
Interarch Building Products serves various sectors, including industrial/manufacturing construction and infrastructure construction. Key clients include Addverb Technologies Limited, Timken India, Berger Paints India, Grasim Industries, and logistics and warehousing service providers.
Key Risks:
The company's operations and profitability are heavily dependent on the availability and cost of raw materials, particularly steel.
Any disruption in the supply of these materials or volatility in their prices could adversely impact the company's financial performance and cash flows. Additionally, underutilisation of existing production capacity or the inability to effectively utilize new capacity could negatively affect the business.
A significant portion of Interarch's revenue is derived from repeat orders. In FY24, 81.3% of the company's revenue came from repeat customers. Any loss of, or a significant reduction in the repeat orders received by them could adversely affect their business, results of operations, financial condition and cash flows.
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