Interarch Building Products – A proxy to infra Capex

Interarch Building Products Ltd is a leading player in the pre-engineered steel construction industry in India. This company specializes in providing complete turnkey solutions, including design, engineering, manufacturing, installation, and erection of pre-engineered steel buildings (PEBs).

Operations: Interarch handles PEB Contracts on a turnkey basis and provides PEB Sales, which include metal ceilings and roofing systems, steel structures, and framing systems.

Manufacturing Capacity: They have 5 manufacturing facilities across India, with a total installed capacity of 161,000 Metric Tons Per Annum (MTPA). A 6th facility is planned in Gujarat, and they also operate three dedicated design centers.

Technological Capabilities: The company uses advanced design software, including Staad Pro, MBS, FrameCad, Tekla, and AutoCAD to facilitate design and engineering for its projects.

• The company achieved a successful IPO listing in August 2024, raising ₹600 crores. Of this:
• ₹200 crores were raised as fresh issues for capex investments.
• The rest was for offer for sale.
• Strategic Expansion: Interarch commissioned Phase 1 of their 5th manufacturing plant in Andhra Pradesh, adding 20,000 MTPA to the capacity. Phase 2 is under construction, and once completed, the plant will add a further 40,000 MTPA.
• The newly commissioned plant provides a revenue visibility of ₹150 crores per annum and is expected to contribute significantly to the company’s future growth.

Industry and Global Market Outlook:

• Global PEB Market: The market is estimated to grow from USD 19-21 billion in 2023 to USD 32-34 billion by 2028, driven by investments in public infrastructure, growing urbanization, and demand for green buildings. Southeast Asia and North America are the key growth regions.
• Indian Construction Sector: The sector is valued at approximately INR 46-48 trillion and is projected to grow to INR 74-76 trillion by FY29, driven by urbanization, infrastructure development, renewable energy projects, and government initiatives.

Indian PEB Market Outlook

• The PEB industry in India is currently valued at around ₹330-340 billion and is expected to grow at a CAGR of 10-14% over FY24-29. The organized sector is gaining a stronger foothold over unorganized players due to reliable track records, quality products, and efficient supply chain capabilities.
• Sectoral Demand:
  • Industrial/Manufacturing continues to be the largest segment.
  • The infrastructure segment is growing rapidly due to the adoption of PEBs in warehouses, cold storage, data centers, and power plants.

Advantages of PEB over Traditional Construction

• Cost & Time Efficiency: PEB structures are 40-50% faster to construct compared to traditional RCC (Reinforced Cement Concrete) constructions.

Interarch Building Products Ltd Q1 FY25 Earnings Call

• Revenue Growth: The company reported a 3% YoY growth in revenue, reaching ₹303 crores in Q1 FY25.
• EBITDA stood at ₹27.1 crores, with an EBITDA margin of 8.9%, slightly improved from 8.6% in Q1 FY24.
• PAT (Profit After Tax) was ₹20.3 crores, a 4.6% YoY growth.

Order Book & Order Wins:

• New orders worth ₹634 crores were secured in the year up to September 2024, contributing to an overall order book of ₹1,350 crores as of September 14, 2024.

Order Mix & Revenue Visibility:

• 62% of revenue came from the industrial segment, 36% from infrastructure, and the remaining from other sectors.

Future Growth & Profitability Guidance:

• The management expects 10-15% revenue growth in FY25 and 15-20% in FY26, aiming to double its revenue in the next 3-4 years.
• EBITDA Margins are guided to remain in the range of 9-10%, with potential improvements as the company scales.