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Eleganz Interiors

• Eleganz Interiors is coming out with an initial public offering (IPO) of 60,05,000 equity shares in a price band Rs 123-130 per equity share.
• The issue will open on February 7, 2025 and will close on February 11, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 12.30 times of its face value on the lower side and 13.00 times on the higher side.
• Book running lead manager to the issue is Vivro Financial Service.
• Compliance Officer for the issue is Rahul Suryanarayan Sharma. 

Profile of the company

Eleganz Interiors is engaged in the business of providing interior fit-out solutions, dedicated towards crafting corporate & commercial spaces which includes corporate offices, research & development facilities, laboratories, airport lounge, flexible workspace and commercial retail spaces, amongst others. Its services are focussed towards creating captivating and functional spaces on a pan India level. It elevates the aesthetic and functional aspects of workspaces by delivering interior fit-out solutions. Its solutions range from bare shell to fully furnished commercial spaces. Its range of services include Design & Build services (D&B) and General Contracting (GC) services. Under D&B, it provides end-to-end services which includes designing, shop drawings of the projects, resource planning & procurement of materials, project execution, final walkthrough & handing over the projects and providing post project support. 

Under GC services, its scope includes (a) civil and interior works i.e. plumbing, POP works, painting, carpentry work and polishing; (b) mechanical work includes ducting, insulations, copper piping, cassette, chiller & air handling units, dampers & diffusers and grills; (c) electrical work includes panels & distribution boards, cables & cable trays, conduiting & wiring, lights fixtures, UPS & batteries, switch sockets & isolators, fire alarm system, sprinklers, and earthing works and (d) final refinements for whole or part of the project which includes windows installation, wall finishes, flooring installation, furniture installation, fixture and appliance installation, signage & branding, quality inspection and touch-ups.

The company bids for domestic tenders’ issued by large domestic and multi-national corporations, project management consultants and international property consultants tenders issued by large domestic and multinational corporations, project management consultants and international property consultants for D&B and GC services. It has been awarded projects on work order basis. The work orders usually contain all codes and standards applicable to the project, as may be set out in the specifications, drawings and Bill of Quantities (BOQ). It consistently endeavours to provide high-quality execution, coupled with optimized budget solutions, to meet its clients' unique needs and expectations. Its ongoing commitment to staying informed about the latest trends and innovations in the industry allows it to present forward-thinking solutions. By incorporating a personalized approach tailored to each client’s objectives, it not only enhances the effectiveness of its services but also foster strong, mutually beneficial relationships.

Proceed is being used for:

• Repayment, in full or in part, of certain borrowings availed by the company
• Meeting working capital requirements
• General corporate purposes

Industry Overview 

The interior fit-out services segment within the construction space refers to the final stage of development, where the internal spaces of buildings are customized and equipped according to the client’s requirements. This segment covers a wide range of activities, including space planning, electrical and mechanical installations, furnishing, and design elements, such as flooring, ceilings, and partitioning. The objective is to convert bare spaces, typically known as “shell and core,” into functional areas for commercial or residential use. In commercial real estate, interior fit-out services are vital for transforming offices, retail stores, and hospitality spaces into operational environments that meet the specific needs of businesses. With the rise of flexible workspaces and global multinationals entering India, the demand for fit-out services has significantly increased. The sector is characterized by custom design solutions that emphasize modernity, sustainability, and functionality.

The Indian office fit-out market has seen remarkable growth, rising from Rs 154 billion in CY20 to Rs 277 billion in CY23, and is projected to reach Rs 805 billion by CY30F, with a CAGR of 16.5%. This expansion is closely tied to increasing office leasing activity and changing workplace needs. India’s office leasing space has also grown substantially, from 39.4 million sq. ft. in CY20 to an expected 69.4 million sq. ft. in CY24. This rise in leasing activity is a significant driver for the fit-out market, as new and expanding businesses require tailored office spaces. The post-pandemic recovery, along with the shift toward hybrid work models, has led to companies investing in office environments that offer flexibility, collaboration spaces, and wellness features, further fueling the demand for fit-out services. The IT, e-commerce, and BFSI sectors have been particularly active in leasing new office spaces, especially in Tier 1 and Tier 2 cities, leading to higher demand for modern, technology-driven office designs. The entry of multinational corporations setting up operations in India has also bolstered this demand.

Office market vacancy indicates the percentage of office space that remains unoccupied and available for lease. It serves as a key metric for assessing the health of the commercial real estate market, reflecting the balance between supply and demand. Vacancy rates increased significantly. The rise from 14.2% to 17.2% suggests growing unoccupied space, driven by economic uncertainty, increased remote working and reduced office space needs during the pandemic. The vacancy rate remained steady, indicating a stabilization in the market as the initial impacts of the pandemic began to level out. A slight decline in vacancy rates suggests a gradual recovery, with improved leasing activity and a potential adjustment to new working patterns and market conditions. The data reveals that while vacancy rates rose during the pandemic, recent trends show a modest improvement, reflecting a stabilizing office market with potential signs of recovery.

Pros and strengths

Strong footprint at key economic hubs in India: The company has presence across major economic and financial centres across India i.e. Mumbai, Bengaluru, Hyderabad, Pune, NCR, Chennai, Ahmedabad and Bhopal. It has branch offices and sales team across these major economic hubs. Its woodwork is conducted at its manufacturing facility located in Mumbai supported by its warehouses located at Mumbai, Pune and Bangalore. It has also executed projects in tier-2 cities such as Indore, Bhopal, Vadodara, Tirupati, Udaipur and Goa. All these combined resource pool and outsourcing arrangements have helped it to stretch its operations across India. It has recently expanded its operations internationally through one of its subsidiaries, Eleganz Infra & Projects Limited, located in Republic of Rwanda and associate company, Eleganz Interiors Pte Ltd., located in Singapore.

Strong and diversified order book: As on December 31, 2024, the company is executing 47 ongoing projects, which include 8 projects under D&B and 39 projects under GC services, having total project value of Rs 70,589.66 lakh and unexecuted order value of Rs 43,486.33 lakh, which also includes a large project under its Design and Build services worth Rs 15972.15 lakh and under its general contracting services worth Rs 18808.45 lakh. Diversification within the order book, including a mix of clients, projects and industries, helps mitigate risks associated with dependence on a single client or sector. This also helps the company to reduce vulnerability to market-specific challenges.

Adhering quality standards and sustainable development practices: The company is an ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certified organization for quality management system. Quality is a pre-requisite for a positive consumer experience and long-term brand loyalty. It follows a comprehensive approach to quality and sustainable development from an early design phase through the construction or project execution period. It works closely with designers for sustainable design and operation of its projects.

Risks and concerns

Significant revenue comes from limited customers: The company derives a significant portion of its revenues from a limited number of clients. The company has garnered 70.64%, 78.04% and 76.75% of its total revenue from top 10 clients in FY24, FY23 and FY22 respectively. It does not enter into long-term agreements with its clients. It relies on work orders to govern the terms related to its projects. While the company’s relationship with its clients has been built over time and few of its clients have conferred the status of a preferred project partner on it, resulting in repeat orders from such clients, its relationship with its clients is on a non-exclusive basis and accordingly, its clients may choose to cease awarding new projects to it which exposes it to a significant increased risk of client attrition. Absence of any long-term contracts or contractual exclusivity with respect to its business arrangements with such clients poses a challenge on its ability to continue to serve these clients in future.

Geographical constrain: The company started its business operations primarily in the state of Maharashtra and expanded its operations in the states of Karnataka, Gujarat, Haryana, Telangana, Tamil Nadu, Uttar Pradesh, Madhya Pradesh, and Andhra Pradesh. As on September 30, 2024, its ongoing projects amounts to Rs 43,486.33 lakh out of which Rs 41,728.89 lakh representing 37 of its ongoing projects are concentrated in the state of Karnataka, Maharashtra and Tamil Nadu. The company has garnered 56.95%, 52.09% and 30.00% of its total revenue from state of Maharashtra. Any changes affecting the policies, laws and regulations or the political and economic environment in the region may adversely impact its business, financial condition and results of operations.

High working capital requirements: The company’s business requires significant working capital in order to finance the purchase of raw materials and furnishing of bank guarantees. Working capital is also required for mobilization of other project related resources, including fit-out materials and labour, and for other work on projects before payment is received from its clients. Further, the actual amount for its future working capital requirements may differ from estimates due to inter alia unanticipated expenses and cost overruns which it may face during the ordinary course of business. If it experiences insufficient cash flows to meet its working capital requirements, its business, results of operations and cash flows could be adversely affected. 

Outlook

Eleganz Interiors is engaged in the business of interior solutions to corporate, laboratories, airport lounge etc. The company specializes in providing fit-out solutions for corporate and commercial spaces, including corporate offices, research and development facilities, laboratories, airport lounges, flexible workspaces, and commercial retail spaces. The company has strong footprint at key economic hubs in India with in-house woodwork facility. On the concern side, the company derives a significant portion of its revenues from a limited number of clients. The loss of any significant clients may have an adverse effect on its business, financial condition, results of operations, and prospects. While it has a diversified geographical presence, its projects have historically been concentrated in the state of Maharashtra and any changes affecting the policies, laws and regulations or the political and economic environment in the region may adversely impact its business, financial condition and results of operations.

The company is coming out with a maiden IPO of 60,05,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 123-130 per equity share. The aggregate size of the offer is around Rs 73.86 crore to Rs 78.07 crore based on lower and upper price band respectively.  On performance front, the company’s revenue from operations increased by 16.31% from Rs 19,025.86 lakh in the financial year ended March 31, 2023 to Rs 22,129.19 lakh in the financial year ended March 31, 2024 primarily due to increase in number of design and build projects and General contracting service projects and execution of higher value contracts. The company has reported 18.37% rise in net profit at Rs 1,220.58 lakh in FY24 as compared to Rs 1,031.13 in FY23.

The company’s primary focus is to strengthen its prospects in executing larger sized projects under its design and build capabilities. It has recently been awarded a large project under its design and build services worth Rs 15,972.15 lakh for software division of a large engineering conglomerate and under its general contracting services worth Rs 18,808.45 lakh airport renovation project. It will continue to focus on the design and built services while seeking opportunities to further increase the size of it projects under General Contracting services. The company intends to capitalize on its experience and project execution expertise and continue to selectively pursue larger projects. Execution of larger-sized projects provides an edge over its competitors, favourable margins and economies of scale.