Can India’s Fastest Unicorn Win the Infra.Market?

Last month, Infra.Market raised $100M to gain unicorn status, only 20 months after getting its first ever institutional round.

Building the Foundation

Souvik Sengupta was working as a finance professional with a major infrastructure player.

He didn’t have to be too familiar with the raw material buying space to tell that something was amiss.

He noticed that while steel and cement were widely available across the Indian subcontinent, they accounted for just about 15% of the raw material required for any construction project.

A closer look at the sourcing of the other 85% material brought to his attention the broken backbone of the Indian construction supply chain.

A highly fragmented and disorganised space, there lacked a unifying platform that could facilitate access and usage of materials across the construction lifecycle. He wondered if he could do something about it, with the help of his friend Aaditya Sharda. 

Aaditya knew the construction industry like the back of his hand. He had more than 10+ years of entrepreneurial experience in the industry.

The pair decided to start Infra.Market in 2016, with the goal of re-imagining construction through the lens of technology.

With their combined experience in the industry, they knew that the construction sector made up almost one tenth of India’s GDP. It was expected to grow at a CAGR of 16% and reach INR 50 trillion, by 2022.

Moreover, with technology revolutionizing every aspect of the world, the real estate industry had all kinds of benefits to take away. This was especially true given the history of the sector. Companies had been investing less than 1% of their revenues in incorporating new technologies. 

The founders decided to set up shop not in Bangalore, or Mumbai, or Gurgaon, but in Thane – close to the action.

The duo had their priorities clearly set, straight from day one.

Gathering Raw Materials

Setting priorities right was imperative because of the scale of the task.

Starting a technology business in construction is one of the hardest as it’s one of the least digitized industries after the agriculture sector. 

Like many traditional, time and materials based industries, Construction Technology (ConTech) and Property Technology (PropTech), were ripe for disruption.

From the PropTech perspective, real estate was just another commodity that could be sold via digital platforms.

These were platforms to enable access to product and market information, which would in turn expand choices and consumer behaviour.

While software, big data analytics and cloud technologies were the more obvious choices for implementation, unconventional avenues such as using AR/VR to simulate property environments were also beginning to find a place in the industry.

Financing and leasing in the PropTech world were not very different from how they work with other assets in the real world either. Much like their counterparts, online platforms for purchasing/leasing real estate were doing extremely well. 

9 out of 10 buyers globally were using online platforms to hunt for property, and 51% of them were making the purchase online.

The PropTech disruption was already underway in India, with names like NoBroker and Nestaway getting to work as early as 2015. It was already infamous because of Housing. They were a tad late in comparison to Indian property listing moguls, Magicbricks and 99acres.com. 

In parallel, there had been a rise of data aggregators in the last decade due to the information asymmetry prevailing in the early stages of this digital reform. Online mortgage and financing platforms came into being as market gaps continued to be identified.

Technology had also rejuvenated the way firms approached marketing. They went from occupying the classifieds space in your local newspaper to some screen real estate on your electronic devices. 

The Indian ConTech market wasn’t in as good shape, though.

Shifting Tectonic Plates

Dreamy-eyed thinkers discussed avant-garde automation in ConTech.

Examples were the potential of drone mapping as a new way to look at land acquisition or blockchain’s potential to bring transparency in the maintenance of land records.

A closer look showed that it was impossible to ignore the numerous glaring issues that were being dealt within the construction life cycle.

There was consensus amongst those on the frontlines that improving building performance and lowering costs would have the biggest impact on the sector. This was something that Infra.Market’s founders caught onto very early given their laser focus on customer obsession.

In a market that was highly unorganised and fragmented, the added project-level nuances only made it tougher to see any kind of organic standardisation mechanism begin to calm the chaos.

To top it all, natural resource endowments varied greatly depending on geography, bringing more disparity into raw material pricing. This was not a problem only for the purchaser.

Medium and small manufacturers, which comprise a majority of India’s unorganized construction market, found it difficult to meet the demands from orders that varied so greatly in size and shape. 

This was one of the key factors explaining the huge swings in pricing. To say that the construction supply chain in India is a little inefficient would be an understatement.

Souvik and Aaditya noticed that large players were, more often than not, the ones who won project bids.This would lead to them finding a contractor, who would in turn order through a distributor.

The order would finally come through to the manufacturers from the distributors, after taking this long route.

Like most truly disruptive thinkers, they inverted the problem in search for a solution. “What if we could make this process simpler by having local manufacturers sell directly to large projects? 

“What if we took care of all that came in between?”, they asked.

Inframarket sought to solve this problem – one that was, in hindsight, a problem begging to be solved. It would also bring parity and transparency in the pricing of materials.

They were fully aware that each project is going to continue to be unique. The two were convinced that with strong technical intervention, excellent planning and a contract fair to both sides, it would help all stakeholders’ businesses to flourish.

Including theirs, of course.

Show Me the Money

As Souvik and Aaditya set up shop in Thane, they were confident that they could leverage maximum interaction with suppliers and contractors. 

They began with concrete and stone walling materials, eventually adding steel, cements and water-proofing chemicals to their offerings.

They began by raising INR 10 million from family and friends in 2017, and remained bootstrapped for the next 3 years. Among their goals was to remain profitable, steadily.

The building blocks of Indian construction were being altered. Infra.Market was at the forefront of it.

Not many startups are able to monetise even after years of operations.

Some do, but bleed so much cash that further equity funding rounds become necessary for sustenance. Only a handful – most notable of which is Zoho – can become profitable from Day 1, and maintain that streak for the fourth straight year. 

Infra.Market was from the Zoho stable.

What worked for Infra.Market was expanding into further fragmented markets of Tier II cities in a thoughtful and committed way.

While construction conglomerates can tap into big retailers for fulfilling their demands in metros, forays into Tier II and Tier III cities lag behind.

Infra.market, with its aggregation of small manufacturers, stepped into such situations to create value. It offered a one-stop trusted procurement solution.

They therefore put a lot of focus on building out Infra.Market’s own brand. While other B2B companies in this space were mainly focused on distribution, Infra.Market built out its moat in the form of high margin private label products.

With 99% of their revenue contributed by core business (product sales), Infra.Market achieved strong PMF with a sustainable business model in place for the long-run.

The next step in the journey was growth.

Momentum Begets Momentum

To understand how Infra.market would grow, one needs to understand the flywheel.

At the heart of it, Infra.Market is a B2B online procurement marketplace for real estate and construction material, leveraging technology to offer fair pricing and smooth procurement.

It aggregated demand and matched it with the supply chain. It gave wholesale pricing on materials, along with affordable credit or financing, which was not always available for small businesses in this sector.

The demand side was managed for contractors and engineers who were offered a vertically integrated platform providing end to end products and services. 

Along with this, Infra.market provided materials and component manufacturers who got access to cloud manufacturing capabilities and automation services offering.

Infrastructure projects were plagued with delayed timelines, poor raw materials, increased complexity in procurement supply chain and sub-standard project management. 

Infra.market was solving all of this. 

During the early days, the company focussed on sourcing construction materials such as ready-mix concrete, fly ash and construction chemicals. The relatively higher margins (~15%) from white label ensured that the lean upstart could hit profitability from Day 1. 

They closed FY17 with INR 12.5 Cr in revenues, and were on their way to hit INR 30 Cr in FY18. Back then, they had only a handful of customers to start with.

But relentless pursuit saw their customer base rapidly scale, and by 2018 they were serving 30 customers daily. On the supply side, Infra.Market had built up a nation-wide connected vendor base of 70-80 vendors. 

In parallel, it was building out its technology stack to gain a competitive moat in a cutthroat business. 

This required capital, but being ‘atypical’ founders relative to their peers, they initially struggled to raise money despite the traction that their product was seeing in the market. 

But perseverance shone through eventually, and Infra.Market raised their first seed round of $3.5MM in August of 2019. With this boost, the company forayed into more product lines. 

It was about to explode.

A Balancing Act

By December 2019, Infra.Market had raised $26M in a Series A round, with $6M in venture debt. 

With the fresh capital, the company looked to expand geographically into newer Tier II cities such as Hyderabad, Chennai and Ahmedabad. 

In Tier II cities, small businesses such as manufacturers of paints and cements stand to improve the quality of their production and meet various compliances when they partner with Infra.market.

The company drew upon its dormant manufacturing facilities in its network of aggregators to ensure that these small businesses get better raw materials, superior quality products,on-time deliveries as well as guidance on pricing.

Such efficiency unlocks helped small manufacturers land larger clients that have higher expectations from the businesses with which they engage. Noticeably, winning international clients had never been easier, with some of its clients located in Bangladesh, Malaysia, Singapore and Dubai.

As a technology platform, Infra.Market created a direct communication chain between its clients and supply chain, ensuring an efficient delivery tracking facility.

The startup dished out a unique and personalised experience for its clients and allotted each one of them a dedicated relationship manager to help understand and fulfill their requirements.

But there were key structural and competitive threats that could have destabilized Infra.Market’s march. 

You Never Walk Alone

Technical adoption was limited in the industry, forcing Infra.Market to enable behaviour changes.

To make things worse, there was less education for the employees as most of them were day laborers. 

In India, governments and cartels heavily regulate the industry. Every state had its material supplier linked with manufacturing firms’ agents directly or has small retail outlets. 

There were just a few solutions to this; either the manufacturers directly sell to the consumers, which is a lot complex to scale, or the advent of technology could change the landscape. 

The latter had taken place, and that’s when India’s first marketplaces IndiaMart had been used widely in India for the construction materials.

But there was another issue with IndiaMart; though construction materials lacked homogeneity across sellers and brands, the logistics was an issue, and many fake listings. 

Although the problem was being solved, the wide smartphone adoption and the internet led to many small firms erupting in the space, solving niche use-cases. 

The ability to solve these numerous problems in specificity led to the eruption of this sector in India. 

Construction projects failed to complete projects on time with the budget. BuildNext mainly focused on solving the problems via construction project management software. The company has arms in virtual reality and materials e-commerce for small projects.  

Infra Bazaar mainly focused on selling directly to the consumer and medium-sized clients when it comes to construction and electrical materials. It also realized the pain point of procuring heavy machinery procurement with a financing arm to ease the process. 

Industrial supplies was a disorganized market that consists of hand tools and machinery, safety equipment and more. Industrybuying was solving the problem with over 50,000 supplies for both B2B and B2C. 

Although Infra.Market only recently branched into equipment rentals; the main focus was primarily concerning construction materials in B2B to large and small scale projects.

To add to their existing business, they also have been enabled to automate their retail clients with the material supply chain, a process that was regarded as heavily unorganized. 

In a crowded space and amidst a wave of disruption, Infra.Market found a growing niche where they could provide a unique solution, and executed to perfection.

Mama I Made It!

In the B2B business, Infra.Market had a heavy client base in the country with L&T Realty, Tata, Phoenix Market city, Hiranandani.

But the recent promise of focusing on building the retail backbone of India has placed Infra.Market ahead of its peers.

They demonstrated their ability to automate India’s retailers by providing them with IT support as well as supply the materials, allowing them to reach remote parts of India and build a complete offering for a variety of customers.

Like with any B2B solutions, the secret sauce with the retail database is to get access to the inventory management system and to enhance the delivery and supply-chain. By adopting e-commerce and going the retail route, many companies burn a lot of money.

But the Chartered Accountant in Shouvik Sengupta is credited as they have been able to scale with these offerings by being profitable from the first year.

In 2020, the total revenues was 350 Crs, and total expenses were 339 Crs. The company was profitable for the fourth straight year garnering 8.59 Cr of profit.

While the revenue picture is undoubtedly rosy, capital expenditure formed the majority of Infra.Market’s cost basis. Therefore, Infra.Market started expanding their private label brand from 40% to 70% from 2019 onwards, fetching them nearly 15%+ margins on sales.

The ability to scale the revenues 5.5x amidst the pandemic proved to be the company’s inflection point as it raised 100MM in Series C funding.

With the fresh funds, their strategy was to expand to India’s remote cities and expand to other countries to lead the way to high margins. 

With over 946 deliveries across 4 countries, and 742 projects Infra.Market is now set to deliver to more overseas clients, is set to build Asia.

Riding on such strong traction in the market, Infra.Market was on track to hit $100MM ARR before COVID-19 struck.

Nation-wide lockdown disrupted the supply chain, putting a brake on its operations to a large extent. Post lockdown, Infra.Market has reportedly managed to bounce back stronger than ever, exceeding pre-Covid level business volumes by September 2020. 

Quite naturally, Tier II cities have been core to this speedy recovery. 

At an ARR of $180MM,  the company is positive that it will be able to further widen its profit margins in FY21 and hit beating the pandemic and the consequent economic slowdown.

The Future Is Here

The COVID pandemic is a blessing in disguise for all the tech companies, but even more for companies like Infra.Market as the adoption is inevitable.

Infra.Market is set to offer their products and services together to control the complete supply chain. The access of the data bank will help them achieve high margins with the clients overseas.

With the latest funding, there is an opportunity to build a software stack and build on the services business with high margins is the road ahead.

Integrating the software with other mega-companies will also make their software sticky for the large construction clients and build on their subscription business.

Capturing the whole eco-system with software services and e-commerce, Infra.Market is on it’s path to attain the target of a 300MM ARR.

It is clear the construction will continue to be a significant portion of India’s GDP. With Infra.Market, developers and builders will be able to make smarter, more informed, and more efficient decisions with the resources that they have.

Like the best ideas of our time, it now seems obvious that construction provided ample opportunity for technology innovation. 

What many saw as a ‘sleepy’ industry which would be a slow grower for years to come, proved to be an ideal grooming field for Infra.Market due to the large market size and apparent lack of competition.

By being close to the customer and executing with precision, Infra.Market was crowned India’s fastest ever unicorn after their recent fundraise.

In April 2020, Marc Andreessen made a public proclamation that “It’s Time To Build” for the future.

India, powered by Infra.Market, looks ready to build.

By Aviral, Bhoomika, Shreyans, Raj

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