Infra - Market - Building On Success - How Infra - Market Cracked India's Infrastructure-Marketplace Puzzle - The Economic Times

6/11/2021 Infra.Market: Building on success: how Infra.
Market cracked India’s infrastructure-marketplace puzzle - The Economic Times
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Building on success: how

Infra.Market cracked India’s
infrastructure-marketplace puzzle
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https://economictimes.indiatimes.com/prime/infrastructure/building-on-success-how-infra-market-cracked-indias-infrastructure-marketplace-puzzle/primearticleshow/83412294.cms 1/22
6/11/2021 Infra.Market: Building on success: how Infra.Market cracked India’s infrastructure-marketplace puzzle - The Economic Times
Synopsis
Infra.Market, the first unicorn from the infrastructure-related space, is among a handful of companies in the
sector to witness some excitement in the recent past. But how does the five-year-old startup manage to grow
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so fast in a sector that has a history of businesses going insolvent?
Home
In India’s ambitious journey towards becoming a
ETPrime Markets News Industry RISE Politics Wealth MF Tech Jobs Opinion NRI Panache ET NOW More
USD5 trillion economy by 2025, one of the biggest

impediments will be its notorious infrastructure
BY
Priyanka Salve
bottlenecks. Over the seven years leading up to FY19, 12 MINS READ
the world’s most populous democracy spent around Jun 11, 2021, 07:11 AM IST
USD1.1 trillion (INR56.7 lakh crore) on infrastructure

development, according to details shared by the
Share This Article
government in April last year.
It is estimated that India, which according to an

Oxford Economics report is among the four countries,
1
including China, Japan, and the US, that make up for
half of the global infrastructure investment
FONT SIZE SAVE PRINT COMMENT
requirements by 2040, would need to spend USD3.8

trillion over this period just to continue its economic
growth rate. If the country wants to compete with the
leading economies of the world, this spend will have to
be raised to USD4.5 trillion by 2040.
But in this vast sea of opportunity, there are many

small boats struggling to sail smoothly owing to a lack
of talent or resources when it comes to braving the
wild waves triggered by the cyclicality of the
infrastructure business.
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Sample this: The median revenue of 88 listed

Home construction-material companies, according to data

platform Refinitiv, is just above INR500 crore.
In the infrastructure industry, material cost typically

ranges between 55% and 78% of the total project value
for road and railway projects, while the rest is labour
and other expenses. For power projects and real estate
projects, the construction materials spend ranges from
26-21% of project value. And as India marches towards
its goal, ramping up infrastructure across the country
is a must. Hence, consolidation is inevitable in
addressing the mammoth task of ‘upgrading India’. As
is the trend in many sectors over the past few years, a
startup has risen to meet this challenge in
infrastructure.
Infra.Market, the first unicorn from the

infrastructure-related startup space, is among a
handful of companies in the segment that have stirred
up some excitement in the recent past. But how did a
five-year-old startup break into the legacy business of
infrastructure construction? In a sector notorious for
making companies insolvent, how has a startup
managed to make profits right from year one?
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While many startups in infrastructure and even its

Home allied sectors have deployed technology to solve

construction supply-chain problems, they have no

special immunity to the uncertainties of this industry.
According to data platform Tracxn, there are more
than 30 deadpooled startups in the material-supply
space. Some were founded in as early as 2012, but a
majority of them were set up around 2015. But over the
years, many have shut shop. Puneet Dalmia-backed
Buildzar and IL&FS-backed mSupply are among them.
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Home According to data from Tracxn, there are around nine

funded startups in this space, and Infra.Market seems

to be at the top of the chain.
The early days
Back in July of 2016, Infra.Market started its journey

from its office in Wagle Estate in Thane near Mumbai.
The area, which has been among the first designated
industrial-development areas in Maharashtra since
the 1960s, is fast redeveloping. The neighbourhood,
which was home to small industrial and production
units till about a decade ago, is now transforming into
an IT hub, with swanky, tall buildings appearing on the
skyline. Hardly 1,000 metres away from the startup’s
headquarters, the construction of Mumbai Metro’s
Line 4 is underway.
For a company looking to supply construction

materials, this is ideal. For Infra.Market, most of its
revenues came from Mumbai until FY20. It should
hardly be a surprise, thanks to the brisk infrastructural
activity going on in the city and its suburbs even now.
The early projects for which the startup supplied

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materials include Phoenix Marketcity mall in Kurla,
Nirali Cancer Hospital in Andheri built by L&T, and a
Home section of Hiranandani’s development project in

Powai, recalls Infra.Market co-founder Souvik

Sengupta.
But before the contracts to supply to these projects,

came the process of enrolling suppliers.
In 2016, the infrastructure sector was still recovering

from the meltdown in development activity after 2012.
Capacities of cement, aggregates, and other
construction material were massively underutilised.
This is where Sengupta and the other co-founder,
Aaditya Sharda, found their opportunity.
Sengupta, a
qualified
"In the manufacturing units we chartered
work with, we have put sensors accountant,
had worked
that tell us about the quality of
with an
raw materials they are buying,
the recipe they’re following,
and the kind of finished
product which comes out. So we
control the entire product end- BACK TO TOP
to-end. We know when each

Home
batch was produced and where
exactly it has been sold."

— Souvik Sengupta, co-founder, Infra.Market
infrastructure company for five years before joining

the Indian Institute of Management in 2014.
Combining his knowledge of the construction industry
and the new ideas he researched as part of his
coursework, Sengupta and Sharda decided to create a
supply-side solution for the infrastructure industry.
“We wanted to build a service level on top of all this

unbranded manufacturing capacity,” says Sengupta.
“According to MCGM (Municipal Corporation of
Greater Mumbai) records, Mumbai, Thane, and Navi
Mumbai have 400 ready-mix concrete plants out of
which only 30 belong to branded players like ACC,
UltraTech, and Prism Johnson, while the remaining
belong to local companies.”
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While the local units could be closer to the worksite,

contractors prefer to work with large national
suppliers, as they provide quality and quantity
assurance. Supply mismanagement can cost a project
site extra labour days and working capital while
quality issues could damage structural integrity and in
turn hurt the long-term viability of a project.
Solving the problem of quantity was slightly easier. In

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the early days, the company approached
manufacturing unit owners who had idle capacity and
Home pre-booked 20%-30% of their inventory. This inventory

from various manufacturing units would be

aggregated and made available to the customers,
assuring them of the company’s capacity to supply
required quantity. For the manufacturing unit owner,
this was a sound proposition as it improved his cash
flow and capacity utilisation.
On the quality front, the problem was solved with

technological interventions. “In the manufacturing
units we work with, we have put sensors that tell us
about the quality of the raw materials they are buying,
the recipe they’re following, and the kind of finished
product which comes out. So we control the entire
product end to end. We know when each batch was
produced and where exactly it has been sold,” says
Sengupta.
This intervention can cost INR5 lakh-INR7 lakh for a

small unit and can go as high as INR25 lakh-INR30
lakh per unit based on the capacity. Currently, the
Thane-based startup has signed up little more than
300 manufacturing partners and operates across five
states. For the six products it has 10-12 manufacturers
BACK TO TOP
per location leading to shorter delivery timelines. Most
products can be delivered under 12 hours to client sites
Home and some as early as less than 3 hours.
Apart from technological intervention, the company

has also attracted talent from top building-material
suppliers across the country. For example, its cement
division is headed by Pankaj Phadnis , a former Dalmia
Cement and ACC executive, while the head of its
chemicals division is Deepak Kanitkar, who has
previously worked with Chembond Chemicals and
Asian Paints. The steel and metals division is headed
by Ramesh Raina, who has over 40 years of experience
in the industry and has worked with Jindal Steel &
Power and Electrosteel.
The year of change
Construction is an old-world business with its own

legacy issues. Contractors do not like changing vendors
and suppliers on a whim, and hence startups such as
Infra.Market have to wait for the right opportunity.
Sengupta says the company onboarded most major
clients when contractors were in a lurch due to
material-supply mismanagement caused by a legacy
supplier.
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Once on board, customers are sticky. Across the
infrastructure and construction space, every
Home stakeholder wants technological intervention. The

government, on its part, started focusing on

transparency with initiatives like FASTag, which
helped plug leakages in road-toll collections.
Companies such as L&T, Dilip Buildcon, and GR
Infrastructure are deploying IoT devices to measure
project-site productivity and progress. Amid this
transformation, it was little surprise that a
technological intervention that allows all parties to
track quality and quantity of materials has found
quick adoption.
From just INR12.5 crore in revenue and a profit after

tax of INR2 crore in FY17, Infra.Market reported a top
line of INR351 crore and a bottom line of INR86.6 crore
in FY20. In December of 2019, the company raised
INR142 crore in Series A funding, almost three and a
half years since it was founded, from existing investor
Accel Partners and new investors such as Nexus
Ventures and Tiger Global Management.
But three months later, the pandemic struck. Supply-

chains across sectors got disrupted and technological
interventions which would have otherwise taken four-
BACK TO TOP
five years for adoption, suddenly found many takers.
Home In FY21 alone, the startup reported a revenue of

INR1,200 crore and a net profit of close to INR350

crore. Its business grew beyond Mumbai and
Maharashtra and the product basket was diversified.
In April 2020, the company got 91% of its revenues
from sale of construction chemicals; 2% from cement
and concrete; 3% from metals and steel; and 1% from
stone materials. This has changed drastically by end-
March 2021. Cement accounted for 29% of revenues
and concrete for 12% in the month of March, while
chemicals were just 15%.
BACK TO TOP
Home While some of it could be attributed to the change in

the job mix of clients, it cannot fully explain the shift

in revenue mix. Infra.Market also launched its own
brand of products in all the six categories, which today
accounts for 66% of its revenues while the rest comes
from the sale of products of other brands on its
platform. Earlier, the company was heavily reliant on
the sale of its own brand, but since other big brands
also prefer to sell via the platform, it’s a testimony to
the fact that the startup has made its mark on the
legacy business of construction.
The company has also started doing direct retail sales.

While B2B business gets the company large clients
and the opportunity to supply in bulk to big project
sites like Samruddhi Mahamarg (the expressway
connecting Mumbai and Nagpur) or Mumbai Metro, it
comes with its own set of challenges — the bigger the
supply order, the higher the risks to the supplier.
Mitigating risks
In infrastructure development, be it buildings or roads,

it takes anywhere between two-five years to complete a
project, depending on the complexity. Contractors do
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the work first and then get paid based on completion
milestones. This leads to long receivables cycles and
Home stretched working capital at times. While an FMCG

company can have a working capital cycle of 30 days,

in construction a 90-day cycle is common.
If a contractor’s payment is delayed, the supplier, too,

must be open to a delayed payment schedule. This is
one of the key reasons why contractors don’t prefer
changing suppliers. So, Infra.Market had to offer the
same benefits. The revenue growth of Infra.Market
from FY17 to FY20 came with the added costs. In FY19,
the company’s receivables cycle was between 40 and
50 days, but in FY20 it rose to 78 days.
To offset these long receivable timelines, the company

has also started a direct-to-retail business, which
ensures a shorter payment schedule. In addition,
Sengupta says, while the company has the ability to
service 25%-30% of material requirements of any given
project, a project is taken up only after considering
customer history and the size of the credit to be given.
“My ability to service a project also depends on how

much credit risk I am willing to take on the customer.
We don’t do any open credit. We either take a bank
BACK TO TOP
guarantee or an LC (letter of credit), or I get an
insurance company that we have partnered with to
Home assess the project and the customer, and tell us how
much material we can supply,” he says.
The investors on the board of the company also

understand the risks that come with being associated
with the infrastructure business, and according to the
startup’s founders, its investors have supported the
move to cut down the exposure to real estate towards
the end of 2019 due to cash-flow issues faced by many
companies in the sector. The decision could have cost
the company 10%-20% in terms of sales had the
pandemic-led demand not surfaced, but the investors
nevertheless supported the management’s decision to
go for risk management over revenue growth.
Acknowledging the importance of risk management,

the young startup in April 2021 appointed former L&T
Financial Service and Reliance Power executive
Bhavin Jain as its chief risk manager. As of March 2021,
the startup’s payment cycle is back to 40-50 days.
The bottom line
With the completion of its Series C funding of USD100

million in February 2021, Infra.Market achieved the
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unicorn status — a first for an infra-led startup. It is
today present in concrete, cement, stone material, steel
Home and metals, chemicals, and electrical product lines. In

FY22, the plan is to expand into paints, pipes, roofing

and flooring, and tiles and sanitaryware.
By FY23, the company projects revenues of USD1.6

billion (around INR11,690 crore) and by FY26 it expects
revenues to touch USD5 billion (around INR36,531
crore). In terms of the revenue mix, the idea is to get
50% from B2B sales and the other half from direct-to-
retail sales.
Is it possible?
If the government sticks to its plan of investing

USD4.5 trillion by 2030 in infrastructure, the odds will
be stacked in favour of Infra.Market. According to a
2015 report by The Washington Post, between 2011 and
2013, China consumed more cement than what the US
did in the entire 20th century. If India wants to
compete with China and stay on course to become a
USD5 trillion economy by 2025, it will have to upgrade
fast.
And that’s good news for startups like Infra.Market.
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(Graphics by Mohammad Arshad)
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1 COMMENTS ON THIS STORY
ashiesh bhatia 19 minutes ago
Why cant you guys be more original? The Ken covered this company last month. Im sure you
guys are following their stories.
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6/11/2021 Infra.Market: Building on success: how Infra.

Market cracked India’s infrastructure-marketplace puzzle - The Economic Times

English Edition | E-Paper

Building on success: how

USD5 trillion economy by 2025, one of the biggest

USD1.1 trillion (INR56.7 lakh crore) on infrastructure

It is estimated that India, which according to an

requirements by 2040, would need to spend USD3.8

But in this vast sea of opportunity, there are many

Sample this: The median revenue of 88 listed

Home construction-material companies, according to data

platform Refinitiv, is just above INR500 crore.

In the infrastructure industry, material cost typically

Infra.Market, the first unicorn from the

While many startups in infrastructure and even its

Home allied sectors have deployed technology to solve

construction supply-chain problems, they have no

Home According to data from Tracxn, there are around nine

funded startups in this space, and Infra.Market seems

The early days

Back in July of 2016, Infra.Market started its journey

For a company looking to supply construction

The early projects for which the startup supplied

Home section of Hiranandani’s development project in

Powai, recalls Infra.Market co-founder Souvik

But before the contracts to supply to these projects,

In 2016, the infrastructure sector was still recovering

to-end. We know when each

exactly it has been sold."

infrastructure company for five years before joining

“We wanted to build a service level on top of all this

While the local units could be closer to the worksite,

Solving the problem of quantity was slightly easier. In

Home pre-booked 20%-30% of their inventory. This inventory

from various manufacturing units would be

On the quality front, the problem was solved with

This intervention can cost INR5 lakh-INR7 lakh for a

Home and some as early as less than 3 hours.

Apart from technological intervention, the company

The year of change

Construction is an old-world business with its own

Home stakeholder wants technological intervention. The

government, on its part, started focusing on

From just INR12.5 crore in revenue and a profit after

But three months later, the pandemic struck. Supply-

Home In FY21 alone, the startup reported a revenue of

INR1,200 crore and a net profit of close to INR350

Home While some of it could be attributed to the change in

the job mix of clients, it cannot fully explain the shift

The company has also started doing direct retail sales.

In infrastructure development, be it buildings or roads,

Home stretched working capital at times. While an FMCG

company can have a working capital cycle of 30 days,

If a contractor’s payment is delayed, the supplier, too,

To offset these long receivable timelines, the company

“My ability to service a project also depends on how

much material we can supply,” he says.

The investors on the board of the company also

Acknowledging the importance of risk management,

The bottom line

With the completion of its Series C funding of USD100

Home and metals, chemicals, and electrical product lines. In

FY22, the plan is to expand into paints, pipes, roofing