Infra.Market to buy majority stake in Strata Geosystems for $111 million

The business-to-business (B2B) platform for construction materials plans to fund the acquisition by raising $150 Million from Varde Partners through an issuance of convertible notes, co-founder Souvik Sengupta told ET on Monday.

The freshly raised capital will be part of a larger round that the company plans to raise in a drum-up to a public listing in the next couple of years, Sengupta added.

Convertible notes, which will transform into equity at a later date, require no valuation to be ascribed to the startup at inception. With desired valuations not coming their way, startups are now resorting to these debt instruments to tide over the economic whiplash, with cautious investors demanding better unit economics and a path to profitability.

Also read |Late-stage startups tap alternative funding routes amid softening valuations

Startups that recently raised capital via convertible notes include HomeLane, Udaan, PharmEasy and HealthifyMe — all late-stage ventures.

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2016-founded Infra.Market is present across building material product categories such as cement, walling products, paint, chemicals, steel and tiles. In a majority of these categories, it operates its own private labels.Sengupta told ET that the Mumbai-headquartered company – which last raised $125 million from returning investor Tiger Global at a post-money valuation of $2.5 billion in August 2022 – is currently clocking Rs 1,000 crore a month in revenue. The figure was at Rs 10 crore a month, when the company had raised its seed round of funding from institutional investors such as Accel in 2019, he added.

The company closed the financial year ended March 2023 (FY23) with a revenue of Rs 11,000 crore, Sengupta said, adding that he expects it to rise by 30-40% in FY24. The company’s revenue stood at about Rs 6,300 crore in FY22.

Infra.Market is present across 22 cities in India with about 70% of its sales coming from its private label. It also manages its own logistics, in-house.

“We are now close to 6-7% EBITDA margin on a monthly-level because of our multi-level play,” Sengupta told ET.

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Present in India and North America, Strata Geosystems’ business includes geosynthetic manufacturing and soil reinforcement technology. It services the infrastructure sector with applications such as retaining walls, reinforced soil slopes and embankments in highways, landfills, mines, railways, ports and container yards among others.

Strata Geosystems will be Infra.Market’s third investment into another company. It had previously acquired RDC Concrete, a non-cement ready-mix concrete company, from private equity firm True North in 2021. It had also invested capital in Shalimar Paints last year.

“Geosynthetics are new-age construction products which offer tremendous carbon savings and aid in sustainable construction goals. We have been at the forefront of advancing the adoption of these products in India and have successfully developed them in several infrastructure sectors such as highways, container yards, etc,” Narendra Dalmia, CEO of Strata, said.