Investors call it the 'Amazon of Construction'. Meet the builders of Infra.Market, the now $2.5 billion behemoth

The pitch meeting was set to start at 9 am at ITC Gardenia, Bengaluru. Prashant Prakash, however, was running late. The young co-founders panicked. It was rare. Widely known for his punctuality, the founding partner at Accel reached at 9.45 am. The friends just had 15 minutes to present the pitch as the VC had to catch a flight at 11 am.

The duo did something out of the box. The pitch deck was dumped, Sharda switched into T20 mode, and made an emotional plea. “For three years, we have been profitable and scaled our business from ₹12 crore to ₹60 crore,” he stressed, clearing his throat. “But nobody is looking at us. What is our fault? Does one need to be in losses to get funded?”

Sharda knew he lacked sophistication. The abridged pitch sounded more like an outburst triggered by a spate of rejections in the past rather than the business plan of a venture which then revolved around aggregate, fly ash, cement, steel and other core materials used in construction. “We are hardcore guys and are into a hardcore business,” Sharda tells Forbes India. “We are not the suited-booted types. We don’t pretend.”

The spur-of-the-moment pitch worked, with Accel coming on board as Infra.Market’s first institutional investor. But there was plenty of drama before the term sheet was signed. We’ll get to that later, but for now, fast forward to February 2021. 

Sharda and Sengupta had a call with Scott Shleifer, partner at Tiger Global, the American hedge fund giant. The mobile rang at 7 am. “What are you guys up to?” asked a stern voice, alluding to a lot of chatter around the Infra.Market co-founders exploring a Series C round of funding.

Big VC and PE (private equity) players were wooing the founders, valuing the startup at over $600 million. “How much can you grow?” Shleifer asked. “Can you deliver the numbers that I want from you in three months? The co-founders found the target challenging but accepted it. “Take a billion-dollar valuation and show me the result,” came the offer. The call ended in 10 minutes, At 7.12 am, a term sheet for $100 million was in the inbox. Tiger was the only investor in the round. “It just took 12 minutes,” recalls Sharda. “That’s the speed at which Tiger works.”

The pace of funding was matched by the jump in valuation of Infra.Market, which pole-vaulted from $180 million to $1 billion. The unicorn co-founders, on their part, delivered on their promise. The sales target was met in two months!

Five months later, they were again on a call with Shleifer. The context was the same. A new set of investors was chasing Infra.Market for yet another round of funding. This time, the bait was a valuation of $1.5 to $1.8 billion. Shleifer’s response was on similar lines. “Stop talking. Just focus on growing the business,” he advised, throwing another stiff revenue challenge at the co-founders. In August, Tiger again led the solo round and pumped in $125 million at a valuation of $2.5 billion.

In five rounds of funding, starting June 2019, the valuation of the B2B construction solutions startup has leapfrogged from a paltry $15 million to $2.5 billion. Perhaps more impressive is that revenue growth has kept pace: From ₹12.54 crore in FY17 and ₹63.21 crore in FY19 to ₹350 crore and ₹1,200 crore in FY20 and FY21, respectively. And even more impressive—and rar—is that the startup has been profitable since inception (see ‘Aggressive Growth’).

The co-founders, for their part, are not at a loss to explain the profitable growth. “For us, staying profitable is by default,” says Sharda. “What’s the point in running a business if you don’t make money?” he laughs.

Infra.Market, underlines Shubhankar Bhattacharya, not only represents the next great ecommerce success story from India but is also a leading construction-tech firm globally. “The secret sauce lies in its ability to deliver best-in-class performance metrics,” says the general partner at global VC firm Foundamental. He points to three aspects of the incredible story. First is the rapid growth and acceleration with scale. “Souvik and Aaditya are execution powerhouses,” reckons Bhattacharya, who invested in the startup in December 2020 in the Series B round of $20 million.

The second aspect is deepening leadership in product categories and forays into new segments. “Lastly, a net profitable company is becoming even more profitable as it grows faster,” he says. While the company is now clocking a revenue run rate of ₹5,000 crore for FY22, the estimated profit number is set to jump from ₹31 crore in FY21 to ₹150 crore in FY22.

Bhattacharya explains the trigger to back the maverick founders: A large, fragmented and fossilised construction industry. Infra.Market, he explains, happens to be the first-mover in spotting a massive opportunity in a market which is conservatively estimated to be worth $200 billion. 

While steel and aggregates have an estimated market size of $66 billion and $55 billion, respectively, cement and concrete are also massive: $31 billion and $27 billion, respectively. “We often internally refer to it as the Amazon of Construction,” he says. It can supply everything for construction and, much like an Amazon or a Flipkart, it has much more distance to go in terms of market share and expanding product categories.

Accel was also impressed by the eagerness of the co-founders to build a multi-dimensional business.

“We were looking for businesses that were not just about distribution,” recalls Prakash of Accel, which had developed a deep exposure to B2B businesses and invested in companies like Power2SME in 2013. The Infra.Market guys, Prakash points out, were willing to go upstream, significantly work on the supply chain, and do the heavy lifting. “They were also focussed on fixing the supply chain issues,” he says.

What has also worked for the startup is its unrelenting focus on buyer stickiness. Infra.Market has two parts to its business: B2B, which has big infrastructure and real estate players as consumers, and a business to retail (B2R), which has SMEs, small contractors and vendors. Customer stickiness, Prakash reckons, comes with a trust in the brand and a presence in several categories. “In some sense, they are an infra conglomerate having multiple private label brands,” he says.

For Infra.Market, private labels make up around 60 percent of revenue. The startup has its own branded concrete, aggregates, walling solutions, construction chemicals, bath fittings, sanitary, tiles and electricals (LED lights and fans). “I don’t think there’s any player in India with private labels at this scale,” says Prakash, adding that a multi-category play is more prevalent in FMCG and not in infra. “In that sense, these guys are breaking into new territory, and setting a new paradigm on how multi-category brands can be built.”

The retail play of Infra.Market, interestingly, happened by chance last year. While the pandemic forced the country to go under lockdown in March, it also resulted in a collateral damage. A pack of investors pulled back the Series B funding term sheet which was supposed to close in March. As businesses came to a screeching halt across the country, liquidity was sucked out of the system. This meant a double whammy for B2B players, who have a large component of the business run on credit.

Infra.Market, though, was staring at a much bigger problem. As it became clear in January that a $20 million round (around ₹151 crore) would materialise over the next two months, Sharda stepped on the gas pedal. “Maine dhanda kheench diya (I expanded the business).” Operations were not only started in Bengaluru and Delhi, hiring too was done aggressively. For a startup which closed FY19 with a revenue of ₹63.21 crore and was set to close FY20 with at least 5x growth in topline, the haste made ample business sense.

Unfortunately, Covid threatened to play spoilsport. “There was so much of uncertainty,” recounts Sharda. The flip side of a business in which the core was B2B was badly exposed. Nobody knew how the pandemic would play out, and what would happen to a business built painstakingly and scaled brilliantly over the last two years. A deep sense of anxiety gripped Sharda. What was also alarming for the first-time founder was an imminent replay of the past. “This time I didn’t want to fall from 10 to minus 5,” he says. 

Bust from the past  

It was 2008. Sharda, then a stock market broker, was on a streak for two years now. A bull run was underway and the multi-baggers were a dime-a-dozen. “Investing was as easy as narrating the nursery poem inky, pinky ponky, father had a donkey,” he recalls. Any stock he touched gave bumper returns. “I was earning ₹2-2.5 lakh per month,” he recalls. “And imagine I did this with the lowest level of maturity about money.”

Sharda bought a car and a flat and indulged in luxuries that most of his ‘educated’ friends too didn’t have. “While they were studying for MBA, CAT and all, I was minting money,” he says. “Mera padhai mein mann kabhi nahin lagta tha (I never had any interest in studies),” he says. For somebody born into a Marwari family, he points out, the biggest learning is paisa banaana (making money).

Entrepreneurship, or finding ingenious ways of making quick money, came easy for him. In fact, it all started during his tuition coaching days. Sharda used to make money by doing the job of supervision and checking papers. “Dhanda waala dimaag tha (I had a business bent of mind),” he says. In 2008, he had more than what he had ever hoped for with a modest education background. “I felt like James Bond,” he smiles, alluding to his dream run in the stock market.   

Then came September 2008. The US housing finance bubble burst, triggering a global financial crisis after Lehman Brothers filed for bankruptcy. Sharda lost his shirt as the indices crashed, with the Sensex plunging from 21,000 to 8,000 in 10 months. He sold his recently acquired assets to pay off family borrowings. “You can’t imagine the guilt when your loved ones have to pay a price for what you did,” he says. “I didn’t fall from 10 to 0. It was 10 to minus 5.”

For the next few years, Sharda worked hard to get back to zero. He joined his uncle’s business of steel trading and honed his sales and marketing skills. After a few years, he realised that he didn’t have any appetite for broking. He dabbled in the business of aggregates and concrete. Another quick realisation was the huge profit margin in the massive unorganised business of construction materials. “I wanted to do something big again,” he recalls.

During the same time—early 2016—Sengupta had turned a chartered accountant and joined an infra company. “We knew each other from our student days,” informs Sharda. Then it was a match of unequals. “Souvik was among the top bracket of the class, and I was among the lowest rung,” he smiles, adding that Souvik’s family was heavily into academics.

Back in 2016, the friends reunited, discussed future plans and decided to take the plunge by starting Infra.Market. “Hardcore combination tha,” says Sharda. While Sengupta had mastered finance and was working in an infra company, Sharda had enough exposure in the business of construction material.

For the first three years, the business remained bootstrapped and profitable. Now the duo wanted to raise money to scale aggressively. Though they had the proof of concept, they didn’t find any takers. While some venture capitalists advised them to take a loan from banks, others mocked them because they couldn’t fathom the business. “You sell concrete and cement, right? So what’s the innovation and disruption?” was a common question. Some of the funders also questioned the need to raise money. “You are profitable. So why do you need money?”

In February 2019, at ITC Gardenia in Bengaluru, the co-founders finally managed to impress Accel’s Prakash. After a few days, the duo was asked to come back again to make a pitch to the investment committee. The meeting started at 1 pm. The room was overflowing with analysts and partners who were neatly dressed in suits and ties. In contrast, Sharda was wearing a kurta and Sengupta didn’t have his shirt tucked in. After presenting the first slide, the duo was abruptly stopped. What happened next was an intense grilling session, which lasted for over two hours. It ended well as Accel decided to invest and the exhausted co-founders happily left for their hotel.

A surprise, though, awaited them. Late in the evening, around 8 pm, the co-founders got a call. “We were asked to rush immediately to Accel’s office,” Sharda recalls. Reason: The funding round was verbally sealed. The term sheet was yet to be signed. The urgency though may have been due to another reason. Before Accel, the Infra.Market co-founders had met partners at Sequoia. The VC fund was also trying to invest. At around 10.30 that night, Accel got the term sheet signed. The deal was closed, and all the parties were at peace.

Cut to 2021. Accel is delighted to spot an early winner in Infra.Market. “What they have managed to do is amazingly incredible,” says Prakash. Think of it, he explains. Two boys from Kolkata, who are not clouded by any thinking on how industries need to be built and supply chains need to be constructed, bring a fresh approach in disrupting the age-old constructions industry. “They thought out of the box. It’s really amazing,” he says.

Sharda, though, reckons that the amazing thing about Infra.Market is the way its retail play has panned out. During the pandemic the co-founders decided to diversify and look beyond B2B. The result was a private label play through contract manufacturing and reaching out to retailers. Now the startup has over 620 dealer-owned and operated stores across 50 cities and towns, and close to two dozen exclusive franchisee stores. The target is ambitious: 2,000 and 75, respectively, by March 2022.

  The startup is now deepening its horizontal play. While in May, it bought Hyderabad-based construction equipment rental player Equiphunt for $10 million, in September, it snapped RDC Concrete, the largest independent ready-mix concrete player in India, for $100 million. “There are more in the pipeline,” says Sharda.

But is he not doing too much at the same time? Building a wide range of brands in tiles, concrete, aggregates, walling solutions, cement and electricals, including LED lights and fans, is not easy and might take a toll on the focus. Entering into multiple categories also means taking a huge risk.

Sharda, though, is not afraid to take bold bets. “Risk to Superman bhi leta hai. Main toh sirf salesman hoon (Even Superman takes risks. I just happen to be a salesman),” he smiles. “We are building a global brand,” he underlines, adding that Infra.Market branded tiles and granites are exported to countries like Jordan, Dubai and the US. Back home, in Bengaluru and Hyderabad, Infra.Market concrete has a huge presence and cement has picked up well in Kerala. “We want it to be a $10 billion company (over five years),” he says. The biggest challenge, he points out, is to do a lot of things in a short span of time. Another big task is to ensure heads of every vertical—steel and cement, among others—are given enough freedom to deliver. “All these guys are industry veterans in their respective fields,” he says, adding that the next funding round for the startup might be a pre-IPO round.

So does it mean it is a big round of funding that might make Infra.Market a decacorn? Sharda smiles. “The only thing that I can promise would be big is our story,” he says. “We have never dreamt small. Whatever the outcome, the result will be big.”