Overview of Garuda Construction IPO
The initial public offering (IPO) of Garuda Construction and Engineering Limited commenced on 8th October 2024 and is scheduled to conclude on 10th October 2024. With only a limited time for investors to engage in this opportunity, the response thus far has been promising across various market segments. However, stock market observers noted that the grey market has shown some caution regarding Garuda Construction’s offering, as shares are currently trading at a grey market premium (GMP) of ₹5.
Garuda Construction IPO GMP Analysis
The current GMP for the Garuda Construction and Engineering Limited IPO stands at ₹5. This figure reflects a significant decline from Wednesday’s GMP of ₹10, indicating a 75% drop in just two days. Such fluctuations can influence investor sentiment and are crucial for prospective applicants to consider before making decisions.
Garuda Construction IPO Subscription Status
As of now, the IPO has garnered a total subscription of 4.10 times over two days. Breaking it down by segments: the retail portion has been notably strong at 6.73 times, while the Non-Institutional Investors (NII) segment stood at 2.58 times. However, the Qualified Institutional Buyer (QIB) segment has shown a lower subscription rate of 0.91 times, which could be a critical indicator of institutional interest in the offering.
Financial Outlook and Growth Potential
Anshul Jain, the Head of Research at Lakshishree Investment and Securities, has endorsed the Garuda Construction IPO, suggesting a ‘buy’ rating. He highlighted the company’s price band set between ₹92 and ₹95 per equity share, which holds a face value of ₹5. Garuda has exhibited impressive financial growth, with revenues increasing from ₹7,702.08 lakh in FY22 to ₹15,417.83 lakh by FY24, which translates to a robust Compound Annual Growth Rate (CAGR) of 26.03%.
Utilization of IPO Proceeds
The capital raised from the offering is earmarked for bolstering operational capabilities and facilitating business expansion efforts, including exploring potential acquisitions. With the current grey market premium suggesting an estimated listing price of ₹100, this could indicate potential gains at debut, thus reinforcing a favorable outlook for subscribers.
Sector Growth and Financial Health
The demand for infrastructure in India is on an upward trajectory, supported by government initiatives. This positions India as a potential contender to become the third-largest construction market globally, contributing around 15% to national GDP by 2030. Garuda’s financial health is impressive, evidenced by its revenue doubling from ₹77.0 crores in FY22 to ₹154.2 crores in FY24, alongside a substantial net profit increase from ₹18.8 crores to ₹36.4 crores in the same period. The company has also effectively managed its debt, currently maintaining a debt-free status.
Investors’ Perspectives
While many analysts are optimistic about the Garuda Construction IPO, some, like SEBI-registered research analyst VLA Ambala, advise caution. Concerns regarding the company’s financials, particularly the elevated trade receivables compared to turnover and the timing of the IPO amidst a weak market, suggest potential pitfalls for quick gains. Ambala emphasizes that investors should consider more stable alternatives currently available in the market that could yield better long-term returns.
Important Dates for Garuda Construction IPO
Following the ‘T+3’ listing rule, the allotment date for the Garuda Construction IPO is anticipated to be on 11th October 2024, with the listing date likely set for 15th October 2024. Investors should stay informed about these dates to track their subscriptions effectively.
Disclaimer
The opinions and recommendations presented in this article represent those of individual analysts and do not necessarily reflect the views of the publication. Investors are encouraged to consult certified financial experts prior to making investment decisions.
