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• Integrity Infrabuild Developers is coming out with an initial public offering (IPO) of 12,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 100 per equity share.
• The issue will open on May 13, 2025 and will close on May 15, 2025.
• The shares will be listed on SME Platform of NSE.
• The share is priced 10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Aryaman Financial Services.
• Compliance Officer for the issue is Krupa Dholakia.

Profile of the company

Integrity Infrabuild Developers is an integrated Civil Contract Company registered as a Class-A contractor since August 24, 2018 and has received the renewed certificate dated June 29, 2024 with the Government of Gujarat. The company specializes in contracting and sub-contracting services for various government projects, including road construction, building, and bridge construction.

Subcontracting involves a main contractor, awarded a project by a government entity, delegating part or all of the work to specialized subcontractors. The main contractor retains overall responsibility for the project, ensuring deadlines, quality standards, and delivery are met. The subcontracting process includes identifying needs, selecting qualified subcontractors, formalizing agreements, and supervising execution.

The subcontractor completes the work as per the contract, while the main contractor ensures it aligns with project specifications, timelines, and budget. Both parties must adhere to legal, safety, and regulatory standards, with the main contractor ultimately accountable for the project's success. 

Proceed is being used for:

• Capital expenditure toward purchase of Machinery and Equipments
• Funding working capital requirements
• General corporate purpose

Industry Overview

India’s high growth imperative in 2023 and beyond will significantly be driven by major strides in key sectors with infrastructure development being a critical force aiding the progress. Infrastructure is a key enabler in helping India become a $26 trillion economy. Investments in building and upgrading physical infrastructure, especially in synergy with the ease of doing business initiatives, remain pivotal to increase efficiency and costs. In Interim Budget 2024-25, capital investment outlay for infrastructure has been increased by 11.1% to Rs 11.11 lakh crore ($133.86 billion), which would be 3.4 % of GDP. As per the Interim Budget 2023-24, a capital outlay of Rs 2.55 lakh crore ($30.72 billion) has been made for the Railways, an increase of 5.8% over the previous year. Starting with 6,835 projects, the NIP project count now stands at 9,142 covering 34 sub-sectors, as per news reports. Under the initiative, 2476 projects are under the development phase with an estimated investment of $1.9 trillion. Nearly half of the under-development projects are in the transportation sector, and 3,906 are in the roads and bridges sub-sector.

Further, India has the second-largest road network in the world, spanning a total of ~6.7 million kilometres (kms). This road network transports 64.5% of all goods in the country and 90% of India’s total passenger traffic uses road network to commute. Road transportation has gradually increased over the years with improvement in connectivity between cities, towns and villages in the country. National Highways Authority of India (NHAI) spent a record-breaking Rs 2,07,000 crore ($24.79 billion) on the construction of national highways in the fiscal year 2023-24. This was the highest capital expenditure ever recorded, representing a 20% increase from last year. India's road network has grown 59% to become the second largest in the world in the last ten years. As of December 2024, India has a total of 146,195 kilometres of National Highway and 2,474 National high-speed corridors.

The infrastructure sector has become the biggest focus area for the Government of India. India's GDP is expected to grow by 8% over the next three fiscal years, one of the quickest rates among major, developing economies, according to S&P Global Ratings. India and Japan have joined hands for infrastructure development in India’s Northeast states and are also setting up an India-Japan Coordination Forum for development of Northeast to undertake strategic infrastructure projects for the region. India being a developing nation is set to take full advantage of the opportunity for the expansion of the infrastructure sector, and it is reasonable to conclude that India's infrastructure has a bright future ahead of it. 

Pros and strengths

Focused on roads, buildings and bridge construction: Since FY 2021-22, the company has successfully completed 111 projects with a total contract value of Rs 21,336.63 lakh. The company’s objective is to utilize its project management skills to ensure quality in construction. The company has implemented industry best practices, including regular mock drills and safety orientation programs, to foster a safe working environment. The company’s fleet of construction equipment and vehicles allows it to handle multiple projects at once. Its understanding in project execution, focus on quality, financial performance, and reasonable pricing help it bid and complete projects.

Visible growth through a robust order book: The company has gained significant experience and have established track record and reputation for efficient project management, execution and timely completion. It has successfully completed more than 111 projects under various contracting and / or sub-contacting agreements. Its expertise in successful and timely implementation of projects provides it with significant competitive advantages. By diversifying its skill set and order book across different business and geographical regions, it is able to pursue a broader range of project tenders and therefore maximize its business volume and contract profit margins.

Technical capabilities and resources: The company is equipped with comprehensive resources, including advanced technical knowledge, specialized machinery, and skilled labour, enabling it to handle a wide range of construction projects. The company’s team consists of experienced individuals with extensive construction expertise and technical knowledge, supported by a pool of engineers, seasoned site staff, and project managers. Additionally, it has access to contractual labour for construction tasks and a dedicated employee base at its Registered office for administrative functions. It also owns a large fleet of equipment and has established relationships to secure necessary equipment for projects in various locations, allowing it to streamline its workflow and deliver projects efficiently and on schedule.

Risks and concerns  

Substantial portion of revenues comes from limited customers: The company derives a significant portion of its revenues from a limited number of clients. For the period ended December 31, 2024 and financial year ended March 31, 2024, March 31, 2023 and March 31, 2022, its top ten largest clients accounted for around 98.86%, 99.74%, 97.67% and 97.64% of its revenues from operations, respectively. The loss of a significant client or clients would have a material adverse effect on its financial results. It cannot assure that it can maintain the historical levels of business from these clients or that it will be able to replace these clients in case it loses any of them.

Geographical constrain: The company’s entire business is concentrated in the state of Gujarat. It is primarily dependent on the projects undertaken or awarded in the state of Gujarat by the Gujarat State Government, the local authorities in the state of Gujarat and other entities funded by the Gujarat State Government. Therefore, it derives its entire revenues from contracts with government entities and are exposed to risks emanating from economic regulatory and other changes in the State of Gujarat. Any adverse changes in the central or state government policies may lead to its contracts being foreclosed, terminated, restructured or renegotiated, which may have a material effect on its business and results of operations.

Business is subject to seasonal fluctuations: The company’s business operations may be affected by seasonal factors which may restrict its ability to carry on activities related to its construction projects and fully utilize its resources. Heavy or sustained rainfalls or other extreme weather conditions such as cyclones could result in delays or disruptions to its operations during the critical periods of its projects and cause severe damages to its premises and equipments. In particular, the monsoon season may restrict its ability to carry on activities related to its projects and fully utilize its resources and may slow its activities on construction projects, which shifts its revenue and accordingly profit recognition to subsequent quarters. Adverse seasonal developments may also require the evacuation of personnel, suspension or curtailment of operations, resulting in damage to construction sites or delays in the delivery of materials.

Outlook

Integrity Infrabuild Developers is a Class-A civil contractor registered with the Government of Gujarat. The company executes construction activities as a contractor for government projects in Gujarat and regularly subcontracts to expand its presence in the state's construction sector. The company is focused on roads, buildings and bridge construction. Also, the company has strong project management capabilities with industry experience. On the concern side, substantial portion of the company’s revenues has been dependent upon its few clients. The loss of any one or more of its major clients would have a material adverse effect on its business operations and profitability. The company’s entire business is concentrated in the state of Gujarat. It is primarily dependent on the projects undertaken or awarded in the state of Gujarat by the Gujarat State Government, the local authorities in the state of Gujarat and other entities funded by the Gujarat State Government. Any adverse changes in the central or state government policies may lead to its contracts being foreclosed, terminated, restructured or renegotiated, which may have a material effect on its business and results of operations.

The company is coming out with an IPO of 12,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 100 per equity share to mobilize Rs 12 crore. On performance front, the company’s revenue from operation has increased by 42.67% to Rs 6,447.02 lakh in FY24 from Rs 4,518.95 lakh in FY23. Such increase was primarily attributable to an increase in tender and orders awarded by government for construction business during the period. Moreover, the company’s profit for the year increased to Rs 94.85 lakh in FY24 from Rs 29.44 lakh in FY23. With the increase in revenue for more than 40%, the profits also rose in line with the order books of the company.

The company intends to continue its practices of strict cost control through (i) ownership and maintenance of modern construction equipments and centralizing procurement of major construction equipments and raw materials; (ii) careful selection of projects; and (iii) cautious expansion into new businesses or new geographical areas. Further, in its efforts to avoid over-leveraging its balance sheet, the company intends to ensure that it is well funded in form of equity capital and hence it proposes to raise working capital finance from this Issue. Such balance sheet management shall augment its financial strength and will be the driving factor for the sustainable growth and expansion of its business in the future.