IPO Size: Rs. 500 cr, Entirely Fresh Issue

• For Rs. 205 cr debt repayment
• Rs. 225 cr working cap
• Rs. 70 cr unidentified M&A and general corporate purposes

Price band: Rs. 210-222 per share

• Rs. 80 cr raised in pre-IPO in Jan 2025, at Rs. 222 per share, from domestic UHNIs

M cap: Rs. 1,800 cr, implying 28% dilution

• Only 10% retail, as company reported loss from FY22 to FY24

IPO Date: Wed 18^th Jun to Fri 20^th Jun 2025, Listing Wed 25^th Jun 2025

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

B2B Construction Material Supplier

ArisInfra Solutions is a 4 year old B2B supplier of construction material, with 65% of its Rs. 700 cr revenue generated from sale of aggregates and ready mix concrete (RMC). It uses technology for procurement, yet business is concentrated in 3 cities - Mumbai, Bengaluru and Chennai, with Mumbai accounting for over half the revenue, as supply is restricted geographically, based on physical presence of its vendors.

Slim Margins

Change in product mix, from lower-margin steel and cement to higher-margin aggregates and RMC, contracted revenue to Rs. 697 cr in FY24, from Rs. 746 cr in FY23. 9MFY25 revenue of Rs. 547 cr, also implies a single-digit annual growth rate.

Adjusted for Rs. 10 cr ESOP cost and Rs. 20 cr one-time non-cash IndAS accounting loss on partly-paid up shares, FY24 EBITDA was at Rs. 39 cr, implying 5.6% margin.

9MFY25 adjusted EBITDA rose to Rs. 45 cr, partly aided by Rs. 6.9 cr miscellaneous income, expanding margin to 8.3%.

Debt of Rs. 323 cr leads to Rs. 30 cr interest expense, resulting in 9MFY25 PBT of Rs. 11.6 cr, which is essentially all the Rs. 11.2 cr other income. This means business is just about breaking even. Although, once 2/3^rd debt is retired from IPO proceeds, interest cost savings will expand net margin from 1% in 9MFY25 to about 4%, from H2FY26E.

Trader or Financier?

As of 31.12.24, outstanding debtors were as high as Rs. 315 cr, representing over 5 months.

30% customers have not paid back for over 6 months. This is despite the ongoing boom in the real estate industry. We don’t even want to forecast the situation in a downturn.

Debtors overdue is similar to non-performing asset (NPA), in banking parlance. Company has not even provided sufficiently for the outstanding debtors, under expected credit loss (ECL) methodology of IndAS accounting, may be due to lack of sufficient historic data.

In addition to this, Rs. 20 cr worth of debtors were credit impaired in the last 4 years, on cumulative revenue of Rs. 2,440 cr between FY22 to 9MFY25. This implies 0.8% NPA has already been booked.

All these are extremely concerning, raising big red flags, especially for the B2B business. Long receivables cycle will always exert pressure on return, restricting RoE to a low-single digit.

In layman language, company is providing 5 months credit period to customers, while itself getting only 1 month credit from its own suppliers. The business appears to be that of a financier and not a materials supplier!

Expensive Pricing

FY26E PAT is estimated close to Rs. 42 cr, translating into a PE multiple of 43x, which is aggressive for 6% expected RoE and a slow-moving debtors. B2C peer Shankara Building Products, clocking Rs. 5,700 cr topline, 1.3% net margin, 9% RoE, is ruling at a PE of 33x.

Many marquee domestic investors like Mankekar family, Mukul Agrawal etc. are company’s shareholders. But, promoter’s stake of 52.5% will drop to only 38%, post IPO, which is quite low. With the IPO, promoters will gain liquidity, through Rs. 37 cr debt repayment, given to the company in FY22 at 12% interest rate.