ARC Insulation NSE SME IPO review

•    The company specializes in the manufacturing and supply of GFRP/FRP to user industry.
•    It marked growth in its top lines for the reported periods.
•    The sudden jump in bottom lines from FY24 onwards raises eyebrows.
•    It is operating in a highly competitive and fragmented segment.
•    Well-informed/cash surplus investors may park moderate fund in this pricey issue for medium term.

ABOUT COMPANY:
ARC Insulation & Insulators Ltd. (AIIL) specializes in the manufacturing and supply of Glass Fiber Reinforced Polymers (“GFRP”)/Fiber Reinforced Polymers Products (“FRP”) composite/constituency products which provides corrosion-resistant, tensile strength and insulating Glass Fiber Reinforced Polymer (GFRP) solutions which can be used as a substitute for steel bars/rebars. It produces dent-resistant, low thermal expansion, corrosion resistant, and insulating GFRP. AIIL’s offerings include GFRP Rebars, GFRP Granting Walkways, GFRP Pipelines, GFRP Tubes, GFRP Fencing for Transformers, GFRP Cable Trays, and other related products designed for industrial, energy and marine’s sectors construction and industrial applications. In addition to its core business, the company acquired the ongoing business of promoter, ‘M/s ARC Insulation & Insulators,’ a sole proprietorship, through a business transfer agreement dated June 01, 2009. Under its brand name “ARC”, the company supplies products for application in diverse industries including Infrastructure, Power, Cooling Tower, Chemical, Composite, Electrical Substation, Mining and others. 

The company has one manufacturing plant which is located at Ramdevpur Village, Parganas South (West Bengal) (“Manufacturing Facility”). Its Manufacturing Facility has separate seamless and welded divisions with latest product specific equipment and machineries including Universal Testing Machine, Electronic Extensometer, GFRP Rock Bolt Making Machine, APC-2.01, Aluminium Casting Heater, 4-2 Boring Deptyhal etc. Further, it has a storage facility at Manufacturing Facility for the purposes of holding inventories of raw material as well as finished products which ensures stability of operations.

ARC’s GFRP products offer significant cost savings through extended durability and present an environmentally friendly alternative with a reduced carbon footprint compared to traditional steel and concrete. AIIL is committed to helping clients create smarter and more sustainable infrastructure, aligning with the increasing demand for eco-conscious and circular solutions, thereby strengthening its position in the market. AIIL’s basic raw material includes glass fibers and resins and it procures raw materials based on market availability, pricing and quality through two main channels (i) domestic suppliers (ii) international suppliers from China, Thailand etc. 

Its current clientele consists of clients from various industries who use its products in their line of business. Operating on a global scale, it understands the diverse needs of GFRP/FRP products worldwide. Through its product portfolio and customized offerings, the company empowers manufacturers to meet consumer demands while maintaining product quality and shelf life. The facility is equipped with the machineries and technologies, allowing it to serve a global clientele as well as a diverse domestic clientele across various states in India. As of March 31, 2025, it had 54 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 3295000 equity shares of Rs. 10 each to mobilize Rs. 41.19 cr. at the upper cap. It has announced a price band of Rs. 119 – Rs. 125 per share. The issue consists of 3045000 fresh equity shares (worth Rs. 38.06 cr. at the upper cap), and an Offer for Sale (OFS) of 250000 equity shares (worth Rs. 3.13 cr. at the upper cap). The issue opens for subscription on August 21, 2025, and will close on August 25, 2025. The minimum number of shares to be applied is for 2000 shares and in multiples of 1000 shares, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 32% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 8.16 cr. for capex for setting up new manufacturing unit, Rs. 3.06 cr. capex on purchase of new office space, Rs. 1.18 cr. for repayment/prepayment of certain debts, Rs. 16.35 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Gretex Corporate Services Ltd., while Maashitla Securities Pvt. Ltd., is the registrar to the issue. GRETEX group’s Gretex Share Broking Ltd., and Nikunj Stock Brokers Ltd. are the market makers, Gretex Share Broking Ltd. is a syndicate member. The IPO is underwritten to the tune of 49.98% by Gretex Corporate and 50.02% by Gretex Share Broking. 

The company has issued/converted initial equity shares at par value, the company has issued further equity shares in the price range of Rs. 17.00 – Rs. 105 per share between June 2009 and September 2024. It has also issued bonus equity shares in the ratio of 3 for 1 in September 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 1.54, Rs. 1.68, Rs. 2.50, and Rs. 3.39 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 7.25 cr. will stand enhanced to Rs. 10.30 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 128.72 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 24.48 cr. / Rs. 2.64 cr. (FY23), Rs. 28.83 cr. / Rs. 6.10 cr. (FY24), Rs. 33.15 cr. / Rs. 8.57 cr. (FY25). Quantum jump in its bottom lines from FY24 raise eyebrows. It is operating in a highly competitive and fragmented segment.

For the last three fiscals, the company has reported an average EPS of Rs. 9.68 and an average RoNW of 53.12%. The issue is priced at a P/BV of 3.59 based on its NAV of Rs. 34.78 as of March 31, 2025, but its post-IPO NAV data is missing from the offer document.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 15.02. Based on FY24 earnings, the P/E stands at 21.08. Thus, the issue appears aggressively priced.

For the reported periods, the company has posted PAT margins of 11.00% (FY23), 21.45% (FY24), 26.18%, (FY25), and RoCE margins of 36.67%, 60.96%, 49.84%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Aeron Composite, as its listed peer. It is trading at a P/E of 13.9 (as of August 18, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
This is the 21st mandate Gretex Corporate in the last three fiscals including the ongoing one.  Out of the last 11 listings, 2 opened at discount, and the rest with premium ranging from 0.40% to 187.36% on the date of listing. Thus, it has an average performance track record.