Infra.Market to increase focus on its B2C-retail segment to drive profits

The commentary comes as the construction materials platform raised $50 million from Mars Unicorn Fund last week. The company is valued at $2.5 billion, as per its official website. Some of its other prominent investors are Accel, Nexus Venture Partners, and Fundamental VC.

"We will be aggressively focusing on the retail and B2C market which includes broad categories like tiles, paint, electricals and wood panels that get sold more in this space rather than B2B. So, we will be spending on these categories from the fund-raise," Sengupta said.

While Infra.Market's core market has primarily been around its business-to-business (B2B) vertical, it expects the B2C and retail division to act as a customer acquisition tool for its main business. "If I want to keep getting a premium on my brand, enjoy a price advantage, and widen customer reach, I will need to have a retail presence to drive my B2B brand growth," Sengupta explained.

Also read: Infra.Market raises another $50 mn from Mars Unicorn Fund

Founded by Sengupta and Aaditya Sharda in 2016, Infra.Market which operates under the parent entity Hella Infra Market Pvt. Ltd, was originally started as a B2B business that uses technology to provide a procurement experience for all players in the construction ecosystem. It focuses on high-volume construction products under its own brands and aims to solve issues such as a lack of price transparency, unreliable quality, fragmented vendor base, and inefficient logistics.

Nearly six years later, it began its B2C and retail vehicle, which is currently making losses and expects to take another 12-18 months to become profitable. "Initially, we weren't in product categories which got sold in B2C and retail. We wanted to first have cash flow-generating businesses in B2B. Also the economies of scale in B2B helped us make the natural extension in B2C" Sengupta said.

While B2B is the longer part of the company's journey, it has spent the last two years in retail which will be a critical growth driver, he explained. Today, the company claims to have over 4,000 retail stores with operations in over 22 states.

Focus on Profitability

In FY23, the B2C & retail segment's losses contributed to the 17% dip in the company's overall profits of ₹155 crore over a 90% increase in revenue of ₹11,846 crore. In recent months, the company has placed increased importance on improving profitability by consolidating on the growth they have had so far.

"For the last 12 months, we have decided to stabilize where we already are. While we will still grow the opportunities in existing areas, we are trying to get more density (volumes) on the products and locations we have already built and focus more on increasing profitability," Sengupta explained, adding that this is part of the company's overall strategy to improve unit economics.

Also read: Construction material firm Infra.Market to raise $150 mn from Varde Partners

In FY24, Infra.Market claims to have reported a revenue of about ₹14,078 crore over a profit of ₹301 crore. The company is yet to file its audited results.

Infra.Market, which competes with the likes of Moglix and Ofbusiness, has seen an uptick in growth in recent years as geopolitical tensions and inflationary pressures have pushed several companies to shift their manufacturing bases to India. This growth has also been driven by the government's greater emphasis on infrastructure and its push for in-house manufacturing through incentives like product-linked incentives and the China plus one strategy.

Venture capital firm Blume's February report on the opportunities in the B2B sector also highlighted that India could emerge as a key beneficiary from China plus one policy shift as global markets seek alternatives. "Factors like increased digitization, access to formal credit, and supportive government schemes are expected to accelerate this growth. Startups would do well to take advantage of this opportunity," Blume said in the report, adding that the next decade is poised to be transformative for the B2B innovative space.

Deals

Infra.Market, which has been profitable for seven years now, also plans to start the listing process next year and will have an initial public offer (IPO) in FY26. The company has also been in discussions for the IPO of its subsidiary RDC Concrete by early next year.

While Sengupta did not disclose any details on the transaction, RDC is eyeing a valuation of over $450 million, as per media reports. The concrete mix manufacturer was acquired by Infra.Market in 2021 from private equity firm True North for $90 million, currently has more than 100 plants across 48 cities.

Earlier this week, Infra.Market sold a minority stake in the company for $20 million in a round led by Zerodha co-founder Nikhil Kamath. This is the second time after the company sold a 10% stake in RDC Concrete for the same amount to a group led by Ashish Rameshchandra Kacholia in December.

Infra.Market has also pursued other acquisitions over the years. Last year, Mint reported that the company will raise $150 million from Varde Partners, a part of which will be used to buy a majority stake in Strata Geosystems. 

The deal with Strata has not gone through yet. Strata is into geosynthetic manufacturing and soil reinforcement technology. It addresses the evolving needs of the infrastructure sector for such applications as retaining walls, reinforced soil slopes, and embankments in highways, landfills, mines, railways, ports, container yards, and more.

In 2022, Infra.Market also invested about ₹270 crore in Shalimar Paints through a combination of equity and debentures, as a part of the company's larger strategy to focus on its B2C and retail segment.