Garuda Construction and Engineering has made a notable entry into the public market through its initial public offering (IPO), drawing considerable interest from retail and non-institutional investors (NIIs) on the first day. However, the participation from Qualified Institutional Buyers (QIBs) has been relatively subdued.
On October 7, the company announced a successful raise of ₹75 crore from anchor investors. The IPO is priced within the range of ₹92-95 per share, comprising a total issue size of ₹264 crore. The subscription period commenced on October 8 and is set to conclude on October 10.
Within the IPO structure, 50% of the allocation is designated for QIBs, while 35% is reserved for retail investors, and 15% is for NIIs. Interested investors can place bids for a minimum of 157 equity shares, with the option to apply for additional shares in multiples of 157.
Garuda Construction specializes in a wide array of civil construction services that cater to residential, commercial, and infrastructure projects. This includes the development of workplaces, hotels, and a variety of additional services aimed at enhancing commercial and infrastructural frameworks. Their expertise encompasses the construction of concrete and composite steel structures, alongside the erection of buildings tailored for commerce, industry, housing, and hospitality.
The company’s red herring prospectus (RHP) highlights its comparable performance within the industry, referencing peers such as PSP Projects Ltd, with a Price-to-Earnings (P/E) ratio of 20; Capacite Infraprojects Ltd, with a P/E of 23.61; Vascon Engineers Ltd at 22.66; Ahluwalia Contracts (India) Ltd at 22.97; and B L Kashyap & Sons Ltd, renowned for a higher P/E of 48.67.
Over recent fiscal years, the company’s revenue from operations surged from ₹77.02 crore in FY2022 to ₹154.18 crore in FY2024, marking a robust compound annual growth rate (CAGR) of 26%. Furthermore, profit after tax demonstrated similar growth, increasing from ₹18.78 crore in FY2022 to ₹36.43 crore in FY2024, achieving a CAGR of 25%.
Garuda Construction IPO Subscription Status
As reported by BSE data, Garuda Construction and Engineering’s initial public offering was subscribed 1.91 times on its first day. This strong interest saw retail investors’ portion being oversubscribed by an impressive 3.43 times, whereas the NIIs segment had a subscription rate of 1.10 times. Notably, the QIB part attracted only 2% subscription.
This varying subscription rate showcases the differing levels of interest across investor categories, with retail investors showing substantial confidence in the offering.
Garuda Construction IPO Review
BP Equities Pvt Ltd
According to BP Equities, Garuda Construction boasts a proven record of successfully completing a variety of projects, which include residential, commercial, and hospitality structures. Notably, the construction sector is a cornerstone of the Indian economy, ranking as the second largest industry after agriculture.
With a remarkable escalation in sales, the company’s figures increased fourfold, from ₹77.0 crore in FY2022 to ₹154.2 crore in FY2024. Additionally, the profit after tax revealed a significant uplift from ₹18.8 crore in FY2022 to ₹36.4 crore in FY2024, showcasing an annual growth rate of 24.7%. In contrast, industry peers maintained varying average debt-to-equity ratios from 0.23x to 0.66x during FY2019 to FY2023; however, Garuda has successfully eliminated its debt and reported a debt-free status in FY2023.
Furthermore, with an impressive order book valued at ₹1,408 crore—equivalent to 9.2 times its sales—and an IPO priced at a reasonable P/E ratio of 19.5x based on FY2024 earnings, the brokerage confidently recommends a ‘SUBSCRIBE’ rating for this IPO with a long-term investment perspective.
Stoxbox
According to Stoxbox, the company’s ability to eliminate its debt, achieving a debt-free status as of FY2023, is commendable. The firm’s order book, valued at ₹1,408 crore and reflecting 9.2 times its sales, coupled with the IPO’s appealing P/E ratio of 19.5x based on FY2024 earnings, solidifies its recommendation to ‘SUBSCRIBE’ for potential investors.
Garuda Construction IPO Details
The IPO encompasses 1.83 crore new equity shares alongside an offer for sale (OFS) of 95 lakh equity shares by the promoter, PKH Ventures Ltd.
The funds procured from this fresh offering are designated for several purposes, including meeting operational funding needs and supporting general business activities, which may cover potential non-organic acquisitions.
Corpwis Advisors Private Ltd has been appointed as the sole book-running lead manager for this offering, while Link Intime India Private Ltd serves as the registrar.
Garuda Construction IPO GMP Today
The Garuda Construction IPO’s Grey Market Premium (GMP) stands at +5 today, reflecting a premium of ₹5 in the grey market as indicated by investorgain.com.
Taking into consideration the upper limit of the IPO price band in conjunction with the present premium in the grey market, the anticipated listing price for Garuda Construction shares is projected at ₹100 per share, which is 5.26% above the IPO price of ₹95.
However, an analysis of the grey market trends over the past nine sessions shows a downward pattern in the current GMP (₹5). Analysts from investorgain.com note that the lowest recorded GMP is ₹0, with a maximum reaching ₹22.
The ‘Grey market premium’ serves as an indicator of investors’ willingness to pay above the issue price, reflecting market perceptions and expectations regarding the stock’s performance post-listing.
Disclaimer: The opinions and recommendations expressed herein are those of individual analysts, experts, and brokerage firms and do not reflect the views of Mint. It is advisable for investors to consult with certified financial professionals before making any investment decisions.
