Interarch Building Solutions

Interarch designs, fabricates and erects pre-engineered steel buildings. A customer who needs a factory shed, a warehouse, a logistics park or now a data centre gives Interarch a plot and a brief. Interarch engineers the frame, cuts and welds it in its own plants, ships it, and bolts it together on site. The whole building arrives as a kit. Against conventional concrete construction it is faster, uses less on-site labour and can be dismantled.

Two revenue lines. PEB Contracts is the turnkey business where Interarch also erects the building, and it is roughly 85 percent of revenue. PEB Sales is supply-only, where the customer or a third party does the erection. The brands are TRACDEK for roofing and cladding and TRAC for suspended ceilings.

The company has been at this for over forty years and listed in 2024. Installed capacity is 221,000 tonnes a year across five integrated plants plus the new Gujarat line, of which about 189,500 tonnes is realistically usable. FY26 revenue was Rs 1,898 crore, up 30.6 percent, on shipments of roughly 162,000 tonnes. It is debt free. Promoters, the Nanda and Suri families, hold 59.4 percent.

The economics are those of a fabricator, not a branded product company. Gross margin is thin, steel is the dominant input and gets passed through, and EBITDA margin has sat between 8.7 and 9.5 percent every year since FY23. There is no pricing power in the usual sense. What Interarch sells is certainty of delivery: engineering depth, 155 plus in-house design engineers, 90 plus project managers, and a track record on projects where a delay costs the customer far more than the building. That is why 72 percent of FY26 revenue came from repeat customers and why the top six players in the industry have grown faster than the rest.

Three things have changed at once.

First, the price. The share is at Rs 1,700 against a 52-week high of Rs 2,763. It is down about 17 percent over a year in which revenue grew 30 percent. The multiple has compressed from roughly 30 times to about 21 times trailing earnings.

Second, the demand mix. For most of its life Interarch built industrial sheds. In Q1 FY27 the "buildings" category, which covers commercial offices, hotels, multi-storey and data centres, was 10 percent of revenue against almost nothing a year ago. The reason is that developers are switching those projects from reinforced concrete to steel frames, which is the single largest structural change in this industry's addressable market. Data centres in particular are steel-frame buildings that need heavy structural sections Interarch could not make until now.

Third, capacity. Interarch is commissioning more capacity in FY27 than it has in the previous decade. Gujarat Phase 1 (20,000 tonnes) started in July 2026. Gujarat Phase 2 (20,000 tonnes) is due in Q2 FY27. The first heavy steel structures line in Andhra Pradesh (25,000 tonnes) is due in Q2 FY27, with a second phase (24,000 tonnes) targeted for Q4 FY27. That takes installed capacity to roughly 290,000 tonnes against 221,000 today.

The heavy structures plant is the one that matters. Ordinary PEB work handles members of about four to five tonnes. Heavy structures takes that to around twenty tonnes, which is what high-rise frames, power stations, steel plants and large data centres require. It moves Interarch from a shed maker into a market it previously had to decline.

Set against all of this, FY27 has started slowly. Q1 revenue was Rs 459.6 crore, up 20.7 percent year on year but down 8.7 percent on the March quarter. EBITDA was Rs 39.4 crore at an 8.6 percent margin. Profit after tax was Rs 28.2 crore, fractionally below the Rs 28.4 crore of a year earlier. Profit went nowhere because other income halved as the IPO money moved out of fixed deposits and into plant.

Already happening. Gujarat Phase 1 is in commercial production. The order book was Rs 1,864 crore on 31 July 2026, up from Rs 1,703 crore in April, helped by Rs 609 crore of order wins over May to July including a Rs 165 crore order from an energy company in Gujarat. Roughly 35 percent of the book now comes from newer end markets rather than traditional industrial sheds.

Guidance linked. Management has guided to FY27 revenue of Rs 2,150 to 2,200 crore and has raised the FY28 number to Rs 2,700 crore from Rs 2,500 crore, on the back of heavy structures coming on line. The FY28 EBITDA margin target is 9.5 to 10 percent against 9.3 percent in FY26. Volume guidance for FY27 is about 190,000 tonnes, roughly 18 percent growth.

Funded but not yet delivered. The board has raised the planned QIP to Rs 250 crore from the Rs 100 crore approved in March 2026, to pull the heavy structures phases forward from one a year to all three within about eighteen months, fund a second Gujarat plant, and pay for the export unit.

Free options. Exports are Rs 10 to 12 crore a quarter today, against a stated ambition of 10 percent of turnover within one to two years. The route is a joint venture with ER Steel Inc of Canada, 76 percent owned by Interarch, making open web steel joists for the North American market. The product is standard there and unused in India, which is the point: Interarch supplies engineering and manufacturing from India, ER Steel handles sales, installation and collections, and is contracted to take 100 percent of the output. A 15,000 tonne plant is planned, production targeted from around mid-2027, initial phase of 4,000 to 5,000 tonnes worth roughly Rs 70 to 75 crore, with a margin ambition above 20 percent. A separate tie-up with Mold-Tek Technologies covers detailing work on export orders on a commission basis. None of this is in the numbers yet and none of it needs to work for the base case.

Working capital funds the growth, not retained cash. FY26 operating cash flow was negative Rs 18.8 crore on Rs 134.5 crore of profit, because working capital absorbed Rs 164.6 crore against revenue that grew Rs 444 crore. The underlying terms did not deteriorate: debtor days went from 53 to 55, inventory days 68 to 69, payable days 50 to 51. This is a percentage-of-completion contracting business scaling 30 percent in a year, and receivables, contract assets and inventory scale with it. Q1 FY27 operating cash flow was positive at Rs 26.8 crore.

The consequence rather than the criticism is what matters. Growth of this shape has to be funded, and the QIP is described as being for working capital as much as capex. If revenue keeps compounding near 20 percent, the working capital line keeps absorbing cash, and the question for FY29 is whether the next expansion needs another raise.

Dilution. Rs 250 crore at around current prices is roughly 8 to 9 percent of the equity base. That is a real haircut to per-share earnings and it arrives before the capacity it funds produces anything.

Order cover is thin against the guidance. The book of Rs 1,864 crore is below one year of trailing revenue and grew about 10 percent year on year while revenue grew 21 percent. Delivering Rs 2,150 to 2,200 crore in FY27 means winning and executing a large share of it within the same year. That is normal for PEB, where contracts run six to sixteen months, but it leaves no cushion. Q1 did Rs 460 crore. Hitting the low end of guidance needs about Rs 565 crore in each of the remaining three quarters.

Capacity is the constraint, not just the opportunity. The FY27 volume target of 190,000 tonnes is essentially all of current usable capacity. If Gujarat Phase 2 or the heavy structures line slips a quarter, the revenue guidance slips with it.

Margin dilution during commissioning. Management has said directly that near-term margin expansion is not assured because new plants and a new product line carry upfront cost. Interarch has never sustained a double-digit EBITDA margin. The FY28 target of 9.5 to 10 percent would be the best in the company's recorded history and it depends on mix, not on price.

Execution reputation. Management's own framing is that PEB companies do not fail for want of orders, they fail because they cannot deliver. Heavy structures is a genuinely new manufacturing discipline for this company and it is being ramped alongside two other plants and an export venture at the same time.

Tax matter. An income tax search and survey took place in August 2025 and the assessment covering returns filed between 2019 and 2025 is open. The company states no material demand has been raised. The auditors have carried it as an emphasis of matter. Unresolved, so it stays on the list.

At Rs 1,700 the market cap is about Rs 2,860 crore on roughly 1.68 crore shares. The company holds net cash of about Rs 66 crore, so enterprise value is around Rs 2,790 crore. Trailing twelve-month profit is Rs 134 crore, so the trailing multiple is about 21 times.

I have taken management's own revenue and margin guidance and carried it down to profit, rather than building a discounted cash flow on a contracting business with a one-year order book. The assumptions below the EBITDA line are mine and are stated so you can disagree with them: depreciation rising as three plants commission, other income falling as treasury cash becomes plant, finance cost near nil, and a 25.5 percent tax rate.

Read the FY27 column first. Revenue grows 15 percent and profit grows nothing. Higher depreciation from the new plants and the loss of treasury income together eat the entire operating gain, and the QIP then takes per-share earnings below last year's. FY27 is a year the company spends, not a year it earns.

That means the case is entirely an FY28 case. On management's Rs 2,700 crore at 9.5 to 10 percent margin, profit lands somewhere near Rs 180 crore and the stock is on roughly 17 to 18 times post-dilution earnings a year and a half out. Whether that is attractive depends on what happens to the multiple. Hold the current 21 times against Rs 98 of FY28 earnings per share and the share is worth a little over Rs 2,000, which is around 19 percent from here over roughly twenty months. Let the multiple slip to 17 times, which is where a cyclical fabricator with single-digit margins and poor cash conversion often trades, and the share does nothing.

Put the other way: at Rs 1,700 the market is paying about 21 times for FY27, a year in which earnings per share falls. It is doing that because it assumes FY28 guidance is delivered. So the price is not discounting failure and it is not discounting a great outcome either. It is discounting management hitting its own numbers, roughly on time.

Note that the board has approved a 1:5 stock split, subject to shareholder approval. All figures above are pre-split. Post-split the same price is Rs 340 and the same FY28 earnings per share is about Rs 19.60. Nothing changes economically.

Positive. Heavy structures commissions on schedule and the first data centre orders execute cleanly. Working capital days come back toward the low forties and operating cash flow tracks profit for two or three consecutive quarters. Order book crosses Rs 2,500 crore, restoring more than a year of cover. Export revenue reaches a run rate near 10 percent of turnover at the margins management has described. Any of these makes the FY28 number look conservative rather than stretched.

Negative. Commissioning slips a quarter or more and FY27 revenue lands below Rs 2,050 crore. EBITDA margin sits at or under 8.5 percent through the year, meaning the new plants are diluting rather than adding. Working capital days push past 65 and the QIP proves to be a working capital plug rather than growth capital. The QIP prices at a steep discount to market. The order book stops growing while capacity keeps arriving, which turns operating leverage into operating drag. And if the income tax assessment produces a material demand, it changes the governance read, not just the numbers.

TenetFour Research. Educational analysis only. Not investment advice or a recommendation to buy, sell, or hold any security. Author may hold a position. Readers are responsible for their own decisions.