Arisinfra Solutions Limited (Avoid)

Highlights

Arisinfra Solutions Limited (ASL), incorporated in 2021, is a business-to-business (B2B) technology-enabled company operating in a growing construction materials market, focusing on simplifying and digitizing the entire procurement process for construction materials, delivering an efficient end-to-end procurement experience.

Their diversified business model consists of two primary components (i) sourcing construction materials from external vendors and supplying them to real estate and infrastructure developers and contractors and (ii) offering third party manufactured construction materials to real estate and infrastructure developers and contractors.

Their deal journey begins with the creation of an RFQ based on the customer’s requirements. Then they leverage network of vendors to shortlist suitable vendors and reach out to them with a widely used messaging application integrated with technology to request bids. Upon receiving the bids, their system evaluates them based on price and credit terms. The bids are aggregated, and a single price quotation, factoring in their margins, is prepared and submitted to executives for approval. Once approved, the quote is shared with the customer for their confirmation.

ASL has delivered 14.10 MT of construction materials, including aggregates, ready-mix concrete (RMC), steel, cement, construction chemicals and walling solutions, utilizing 1,729 vendors and serving 2,659 customers across 1,075 pin codes in various cities, including Mumbai (Maharashtra), Bengaluru (Karnataka) and Chennai (Tamil Nadu).

Out of the total proceeds of Rs. 4,996 mn, Rs. 2046 mn would be utilised for repayment / prepayment, in full or part, of certain outstanding borrowings availed by the company. Rs. 1770 mn would go towards funding working capital, Rs. 480 mn would go towards investment in subsidiary for funding their working capital needs. Rs. 700 mn would go towards general corporate purpose and unidentified inorganic acquisitions.

Key Highlights

• The infrastructure construction B2B market in India was ~USD 105 bn to USD 115 bn in 2024 and is projected to grow at a CAGR of 10 pct – 12 pct to USD 175 to USD 200 bn in 2029 whereas the total B2B real estate construction market is estimated to be ~USD 170 to USD 180 bn in 2023, growing at 6 pct to 8 pct to reach USD 235 bn to USD 255 bn by 2029.
• The company operates on a lean inventory model, limiting the inventory holding to in-transit stock and, therefore, does not require any storage places or warehouses. Further, when customers place orders, the construction materials are dispatched directly from vendor’s premise to the customer’s specified delivery site.
• Through their Subsidiary, ArisUnitern Re Solutions Private Limited (ArisUnitern), they offer a diverse range of value-added services, including advisory and consultancy services, along with marketing and sales support, specifically tailored to meet the needs of real estate developers with respect to their projects. Such services enable them to increase revenues, foster long-term relationships with developers and help position ASL as trusted advisors and partners to their businesses.
• They are a technology-enabled company with a scalable operating model that allows them to expand their operations and drive revenue growth with lower incremental costs. ASL’s competitive technology advantage lies in the capability, functionality and scalability of their systems, allowing them to capitalize on large market opportunities by increasing the scale and effectiveness of operations.
• ASL’s key growth strategies includes (i) Optimize the mix of construction materials sold to improve margins (ii) Form strategic partnerships to strengthen supply chain and expand portfolio of third-party manufactured construction materials (iii) Form strategic partnerships to increase demand side growth and grow revenues (iv) Enhance working capital efficiency to support sustainable growth (v) Enhance market penetration and increase wallet share with existing customers (vi) Continue to leverage technology to further optimize operations and improve user experience.
• The company’s sales from operations grew at a CAGR of ~24.11 pct for FY22-24. In FY24 sales of the company fell 6.59 pct while EBITDA came positive at Rs. 130 mn against loss of Rs. 1.09 mn in FY23. However, loss of the company widens to Rs. 173 mn in FY24 against the loss of Rs. 154 mn in FY23. In 9MFY25, the company posted sales/EBITDA/profit of Rs. 5465 mn/ Rs. 399 mn/Rs. 65 mn.

Key Risk

• Their business and construction material industry can be adversely affected by seasonal changes.  
• They have generated negative operating cash flows which may impact their financial condition in future as well.
• The company’s business can be highly affected by any downturn in the housing, infrastructure and commercial real estate due to its high dependence over them.
• As there is limited operating history of the company, hence, the historical performance may not be indicative of their growth.

Financial Performance

Valuation

ArisInfra Solutions Limited is a modern platform that helps construction and infrastructure companies buy materials easily and manage their finances smartly. They are a technology-enabled company with a scalable operating model that allows them to expand their operations and drive revenue growth with lower incremental costs. At the upper end of the price band of Rs. 222, the issue priced at FY25E annualised EV/EBITDA of 35.8x. The issue appears to be fully priced. One can avoid this issue.

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