Business Profile of the Arisinfra Solutions Limited

Arisinfra Solutions is B2B technology-enabled company in the growing construction materials market aims to simplify and digitize the procurement process for construction materials. They leverage their extensive network of vendors to source and provide construction materials to real estate and infrastructure developers and contractors.

Between April 1, 2021 and March 31, 2024, they delivered 10.35 million metric tonnes of construction materials, serving 2,133 customers across 963 pin codes. The company aims to transform the B2B procurement ecosystem by minimizing intermediaries and enhancing margins.

They leverage technology and human expertise to streamline the process of purchasing, selling, and delivering construction materials. Their integrated delivery management system provides real-time updates to customers, ensuring coordination, convenience, and smooth delivery.

The company uses advanced tools like artificial intelligence and machine learning to assess and manage credit risk, make informed decisions, and mitigate financial risks.

Arisinfra Solutions Limited IPO Objective

As per the draft red hearing prospects, the IPO issue consists only of offer for sale.

• The company only has a fresh issue of Rs. 600 crores. Out of which; Rs. 204.6 crores will be used for repayment of certain borrowings, Rs. 177 cores will be used for funding working capital, Rs. 48 crores will be used fro investment in subsidiary, Rs. 20.4 crores will be sued for Purchase of partial shareholding from existing shareholders of subsidiary and rest of the amount for general purposes.

(In ₹ million)

IPO Details of Arisinfra Solutions Limited:

Issue Price & Size: Arisinfra Solutions Limited IPO

The issue price of Arisinfra Solutions Limited hasn’t been released yet. Upon releasing the dates, the investors can bid between those price ranges. The company only has fresh issue of Rs. 600 crores.

Launch Date of Arisinfra Solutions Limited IPO

The IPO opening date of Arisinfra Solutions hasn’t been officially announced yet, upon the declaration of dates investor can bid for IPO.

Arisinfra Solutions Limited Financial Statements

Arisinfra Solutions Limited Promoters & Shareholding

As per the draft, there are total eight promoter of Arisinfra Solutions Limited.

The promoter’s aggregate holding in the company constitutes to 44.02% of the paid-up share capital of company, on a fully diluted basis.

Should You Subscribe to Arisinfra Solutions Limited IPO or Not

While investing or subscribing to any IPO, consider the investment rationales related to the company. Hence, here you can find out the strength of the company that will be its growth factors. And also check the risk factors that can affect the growth and operational efficiency of the company.

Competitive Strengths of Arisinfra Solutions Limited:

Leveraging technology

The company is a B2B technology-enabled company that simplifies and digitizes the procurement process for construction materials. Powered by advanced tools like artificial intelligence and machine learning, they minimize the need for multiple intermediaries and enable seamless communication with customers and vendors.

Data analysis empowers informed decisions by collecting, monitoring, and analyzing data from various touchpoints on a deal, including customer and vendor locations, delivery distances, vendor pricing history, credit performance, vendor credit terms, and historical acceptance rates.

Capitalize on market opportunities

A technology-enabled company with a scalable operating model has expanded its operations and driven revenue growth with lower incremental costs. The company's digitized approach allows for seamless onboarding of customers and vendors in different geographies.

The company's diversified business model includes sourcing construction materials from external vendors and offering third-party manufactured construction materials. The company's advanced technological infrastructure handles high volumes of transactions, ensuring a seamless experience for its growing base of customers and vendors. The company's effective integration of technology optimizes resources and enhances operational efficiencies, shortening order processing and procurement timelines, and accommodating regional complexities.

Technology enabled credit risk analysis

The company has implemented a comprehensive assessment framework to identify, monitor, and manage potential credit risks in its operations. This includes evaluating new customers' GST filings and financial statements, screening existing customers, making pricing and credit decisions based on their historical behavior, and tracking customer data points.

The company uses technology to generate real-time business analysis reports, providing insights into key metrics like sales, margins, cash flow, and credit limits.

Future strategy

The company plans to optimize its construction materials mix to improve margins and align with market demand. It will also form strategic partnerships with third-party manufacturers to strengthen its supply chain and expand its portfolio of construction materials.

The company plans to continue leveraging technology to optimize operations and improve user experience. They plan to automate demand matching with supply, transition to credit-linked pricing, and pilot portable and desktop-based hardware to streamline order processing, invoice generation, delivery tracking, and payment receipts.

The company uses advanced technology, such as Cara AI, to read handwritten documents and automatically tag them to the respective delivery in a purchase order.

Risk Factors of Arisinfra Solutions Limited:

Product concentration

The company generates a significant portion of its revenue from the sale of aggregates, RMC, and steel to real estate and infrastructure developers and contractors. Data in table below shows the percentage of revenue composition from product that company sold in period provided.

If due to slowdown in real estate sector or decline in infrastructure spending, the sale of company product may witness a decline. This could negatively impact the company's business, results of operations, financial conditions, and cash flows.

Geographic concentration

The company has historically derived a significant portion of its revenues from the states of Maharashtra, Karnataka, and Tamil Nadu. For the past three years, these three states contributed more than 80% to the total revenue of the company. However, due to their geographic concentration, their operations are susceptible to local and regional factors such as civil unrest, natural disasters, and competition. Any sort of disruptions leading to slowdown may adversely affect the company's business, its operations, financial condition, and deteriorate cash flows.

Customer concentration

The company relies heavily on the top ten customers for real estate and infrastructure projects, which could significantly impact future revenues. The revenue from these customers does not exceed 50% of the company's revenue from operations. However, this dependence exposes the company to risks such as delays, cancellations, bankruptcy, liquidation proceedings, and adverse market conditions. The volume and timing of transactions from these customers may vary due to factors like market share decline, project completion, or growth strategies.

Delays or defaults in payment by the customers

As can be seen from the data mentioned in the table below, the company's business model runs on selling merchandise against trade receivables. The company has significant levels of outstanding receivables, and if customers delay or default, it could have extreme negatively implication for the company. If the customers cannot pay in a timely manner or at all for the product sold, the company may face losses.

Adverse macroeconomic conditions could lead to financial difficulties, such as insolvency or bankruptcy for customers, which could cause customers to delay payments or request payment modifications, increasing the company's receivables.

Substantial working capital requirement

The company's business requires significant working capital, as it takes longer to receive payments from customers than to pay vendors. The company funds most of its working capital requirements through internal accruals/equity and financing facilities from various banks, financial institutions, and non-banking financial companies. In addition, the company utilizes invoice/bill discounting arrangements with multiple entities to access funds and bridge gaps in working capital requirements.

As can be seen from table below, companies working capital has been rising year over year but the net working capital days has seen a fall from FY22.

A continued increase in working capital requirements without adequate financing may affect the ability to make payments to vendors and have an adverse effect on its business, results of operations, financial condition, and cash flows.

History of losses

In the past three years, the company has incurred losses in operations due to conditions beyond company’s control. These losses if continues could negatively impact the business, its equity value, and overall perception of the company.

• Loss in FY24 was due to expenses on derivatives and employee share-based payment expenses.
• Loss in Fiscal 2023 was primarily due to expenses related to the loss allowance on trade receivables.
• Loss in FY22 was primarily due to loss allowance on trade receivables and fair value loss on derivatives.

Arisinfra Solutions Limited Grey Market premium

Grey market premium is the premium quoted over the IPO issue price. GMP shows that investors are ready to pay above the upper band of the IPO issue price. GMP is determined in the grey market as per the demand and supply of the shares in the primary market. A grey market is that unofficial ecosystem of unlisted companies' stocks that start trading even before the launch of the IPO to the date of its listing.

Also Read: What is Grey Market Premium in IPO: How is GMP Calculated & Reliable

However, GMP is not a reliable factor, as it keeps fluctuating as per the demand and supply of shares in the primary market. There are numerous factors that affect the stock market in India and individual stock prices of different companies that are already listed and trading in the secondary market. However, for an IPO-bounded company, you can consider the GMP as the speculative listing price of the share

According to various online sources, the Grey Market Premium or GMP of the Arisinfra Solutions Limited is trading around Rs XX in the grey market. It means shares are trading at the upper band issue price of Rs XX with a premium in the grey market and may list around the same price.