Garuda Construction and Engineering Ltd is set to launch its public offering from October 8 to October 10, 2023. The company has decided on a price band of ₹92-95 for its issue, which aims to raise ₹264 crore. The IPO includes 1.83 crore new equity shares along with an Offer For Sale (OFS) of 95 lakh equity shares by its promoter, PKH Ventures.
IPO Size and Allocation
The initial public offering (IPO) has a total size of ₹264 crore, primarily influenced by the upper end of the designated price band. This strategic move provides an excellent investment opportunity for institutional and retail investors alike.
Utilization of Funds
Out of the funds raised through this public offering, ₹100 crore is earmarked for meeting working capital needs. The remaining capital will be allocated for general corporate purposes, including potential inorganic growth through acquisitions.
Investor Segmentation
In terms of allocation, 50% of the IPO size has been designated for qualified institutional buyers, 35% for retail investors, and the remaining 15% for non-institutional investors. Investors can bid for a minimum of 157 equity shares, with subsequent bids in multiples of 157 shares.
Investment Insights from RHP
Investors contemplating participation in Garuda Construction’s IPO should review the 10 key insights provided in the Red Herring Prospectus (RHP) before making their investment decisions.
Promoter Overview
The company’s promoters consist of Pravinkumar Brijendra Kumar Agarwal, PKH Ventures Ltd, and Makindian Township Private Ltd. Their experience and market presence are expected to guide the company toward successful growth.
Industry Comparisons
Garuda Construction’s listed peers include PSP Projects Ltd (P/E of 20.0), Capacite Infraprojects Ltd (P/E of 23.61), and B L Kashyap & Son Ltd (P/E of 48.6). Understanding these comparisons can provide a broader perspective for investors regarding the company’s competitive positioning.
Company Background
Founded in 2010, Garuda Construction and Engineering provides a comprehensive range of construction services, catering to sectors such as residential, commercial, and industrial projects. Additionally, they specialize in operation and maintenance (O&M), as well as mechanical, electrical, and plumbing (MEP) services, delivering end-to-end solutions in the construction domain.
Industry Growth Potential
India’s construction, manufacturing, and mining sectors are witnessing significant growth, bolstered by supportive government initiatives. The industrial growth is projected to maintain a year-on-year increase of 7.9%, amounting to an impressive ₹48.9 trillion in FY24.
Order Book Status
As of September 28, 2023, Garuda Construction’s order book stands at ₹1,40,827.44 lakhs, encompassing 12 ongoing projects of which seven exceed a contract value of 10,000 lakhs each.
Financial Overview
| Financial Metric | FY 2024 | FY 2023 |
|---|---|---|
| Revenue | Decreased by 4% | |
| Profit After Tax (PAT) | Decreased by 11% |
The company’s revenue and Profit After Tax (PAT) have both faced declines, reflecting ongoing challenges in the construction industry.
Key Customers and Revenue Streams
As of March 31, 2024, revenue from the construction segment amounted to ₹1,187.50 lakhs from four key customers. Historical data shows a decrease in reliance on any single customer, which is advantageous for diversifying revenue streams.
Risks Associated with the IPO
Investors should consider several key risks, which are outlined as follows:
- The criminal case against promoter Pravin Kumar Brijendra Kumar Agarwal could adversely affect the company’s reputation and operations.
- A previous unsuccessful IPO attempt by PKH Venture Limited raises concerns about investor confidence.
Lock-in Period for Anchor Investors
For anchor investors, 50% of the shares will be locked in for a period of 90 days post-allotment, while the remaining 50% will be locked in for 30 days, providing some stability to the share price post-listing.
Disclaimer: The insights presented here represent the views of various analysts and not the official stance of the publication. Investors are encouraged to consult certified financial advisers before making investment decisions.
