IPO Size: Rs. 600 cr 

• Rs. 200 cr Fresh Issue for (i) capex Rs. 78 cr - greenfield Rs. 59 cr, brownfield Rs. 19 cr (ii) working cap Rs. 55 cr (iii) technology investment Rs. 11 cr 
• Rs. 400 cr Offer For Sale (OFS) – 40% of OFS by PE investor OIH completely exit  12% stake after 17 years and 60% of OFS by two promoters (88% to reduce to 60%).

Price band: Rs. 850-900 per share

M cap: Rs. 1,497 cr, implying 40% dilution

IPO Date: Mon 19^th Aug to Wed 21^st Aug 2024, Listing Mon 26^th Aug 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

India’s 2^nd Largest Pre-engineered Steel Buildings (PEB) Manufacturer

Interarch Building Products, short for International Architecture, co-promoted by an IIT Delhi graduate, manufactures pre-engineered steel buildings with an installed capacity of 1.41 lakh MTPA, across 4 integrated plants, in Uttarakhand and Tamil Nadu. Capacity utilization was reported at 60% for FY24, but was more like 80%, based on available capacity. Thus, it is undertaking greenfield and brownfield expansion, through a mix of internal accruals and IPO proceeds, to meet growing demand. 

42% Capacity Addition planned in 1 Year

To enhance presence in South India, company is establishing a 60,000 MTPA greenfield plant in Andhra Pradesh with total capex of Rs. 85 cr.

• Phase 1 - 20,000 MTPA at Rs. 27 cr investment is being funded entirely via internal accruals; to commence production in FY25 itself
• Phase 2 - 40,000 MTPA with Rs. 59 cr capex, from fresh issue proceeds; to commercialize by June 2025.

Thus, in the next 10 months, company’s installed capacity is expected to rise by 42% to 2 lakh MTPA.

Healthy Financials

FY24 revenue stood at Rs. 1,293 cr, with Rs. 126 cr EBITDA, translating into an EBITDA margin of 9.7%. Net profit stood at Rs. 86 cr, leading to a healthy net margin of 6.7% and an EPS of Rs. 59. Company’s order book stands at Rs. 1,153 cr, as of 31.3.23, which is guided to be executed in 8-9 months, providing healthy growth visibility.

Equity is small at just Rs. 14 cr (face value Rs. 10 each), with networth of Rs. 459 cr. Company remains debt-free with surplus cash of Rs. 132 cr, or Rs. 92 per share.  

Attractively Priced

On an estimated 15% profit growth for FY25E, current year expected EPS of Rs. 65 discounts the upper end of IPO price by a PE multiple of only 14x. This is highly attractive for the debt-free balance sheet, planned capacity addition and macro tailwinds in the form of Atmanirbhar Bharat and higher manufacturing activity in the country (renewable energy, auto, engineering, warehousing, semi-conductors etc.)

Interarch’s RoE is ~20% as against 3% and 11% for listed peers Everest Industries and Pennar industries respectively, both ruling at a PE multiple of over 21x. Thus, IPO pricing is investor-friendly.