Garuda Construction and Engineering IPO booked 1.91x on Day 1: GMP, subscription status. Should you subscribe?

Garuda Construction IPO: Today marks the debut of Garuda Construction and Engineering Ltd in the primary market. The company, which offers comprehensive civil construction services, raised ₹75 crore from anchor investors on Monday, October 7, ahead of its initial public offering (IPO).

Garuda Construction and Engineering IPO price band is set in the range of ₹92-95 per share, with a total offer value of ₹264.10 crore. The investors can subscribe to the initial share sale from today (Tuesday, October 8) until Thursday, October 10.

Half of the issue size has been allocated to qualified institutional buyers (QIBs), while 35 per cent is set aside for retail investors, and the remaining 15 per cent is reserved for non-institutional investors (NIIs). Interested investors can bid for a minimum of 157 equity shares and in multiples of 157 equity shares thereafter.

The company provides full-service civil construction for projects involving residences, workplaces, hotels, and infrastructure in addition to additional services for commercial and infrastructural projects. Civil construction includes building concrete and composite steel structures and erecting buildings for use in commerce, industry, housing, and hospitality.

As per the red herring prospectus (RHP), the company's listed peers are PSP Projects Ltd (with a P/E of 20), Capacite Infraprojects Ltd (with a P/E of 23.61), Vascon Engineers Ltd (with a P/E of 22.66), Ahluwalia Contracts (India) Ltd (with a P/E of 22.97), and B L Kashyap & Sons Ltd (with a P/E of 48.67).

The company's revenue from operations increased from ₹77.02 crore in fiscal 2022 to ₹154.18 crore in fiscal 2024, representing a Compound Annual Growth Rate (CAGR) of 26%. Additionally, the profit after tax grew from ₹18.78 crore in fiscal 2022 to ₹36.43 crore in fiscal 2024, with a CAGR of 25%.

Garuda Construction and Engineering IPO subscription status

The initial public offer of Garuda Construction and Engineering has been subscribed 1.91 times on the first day of subscription today, as per BSE data.

The initial share sale received bid for 3,80,95,736 shares against 1,99,04,862 shares on offer, according to BSE data.

The portion for retail investors received 3.43 times subscription while the quota for non-institutional investors got subscribed 1.10 times. The qualified institutional buyers (QIBs) part is booked 2%.

Garuda Construction IPO Review

Arihant Capital Markets Ltd

As per the brokerage report, Garuda construction has an order book worth ₹14 billion, which is approximately 9 times the revenue of FY24, indicating strong business visibility. The company is committed to maintaining an asset-light model, focusing on high-margin projects, and expanding its market presence. Notably, the company has successfully completed prestigious projects such as the Delhi Police HQ and the Golden Chariot Hotel in Mumbai, demonstrating its strong execution capabilities. At the upper price band of ₹95, the issue is valued at a P/E ratio of 24.24x post issue, based on the FY24 post-issue EPS of ₹3.92. The brokerage has assigned a "Subscribe for listing gains" rating for the issue.

Swastika Investmart Ltd

The brokerage firm highlights the company's strong order book and diverse projects as its key strengths. Although its PE ratio is in line with industry standards, its return on net worth surpasses that of its peers. While FY23 saw significant growth in revenue and profit, FY24 experienced a slowdown due to the election year. The company's exposure to risks is a result of its cyclical nature. Investors comfortable with higher risks may want to consider the IPO as an opportunity for potential long-term growth.

Tarun Singh, Founder and MD, Highbrow Securities

This IPO deserves careful scrutiny due to its uneven financial track record and unimpressive past performance. The company's finances have been marked by significant fluctuations, leading to average results.

Moreover, its substantial unpaid customer invoices pose a significant cash flow risk, compounded by its group company-PKH Ventures failed IPO attempt in July 2023. That offering's withdrawal due to insufficient investor interest casts doubt on this current IPO's legitimacy. This seems more than just a retry – it's an adamant second bid for public listing, driven by determination rather than financial stability.

The valuation multiple currently appears overstretched, suggesting an unrealistic anticipation of future growth. In light of prevailing market circumstances and the company's financial standing, the IPO's pricing raises sustainability concerns. Therefore, investors should carefully assess the risks and deliberations before undertaking an investment in this offering.

Garuda Construction IPO details

Garuda Construction and Engineering IPO consists of 1.83 crore new equity shares and an offer for sale (OFS) of 95 lakh equity shares by promoter PKH Ventures Ltd.

The proceeds from fresh issue will be used to fulfil working capital requirements and for general corporate purposes, such as potential inorganic acquisitions.

Corpwis Advisors Private Ltd is the sole book-running lead manager for the issue, and Link Intime India Private Ltd is the registrar.

Garuda Construction IPO GMP today

Garuda Construction and Engineering IPO GMP today is +5. This indicates Garuda Construction share price was trading at a premium of ₹5 in the grey market, according to investorgain.com.

Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of Garuda Construction share price is indicated at ₹100 apiece, which is 5.26% higher than the IPO price of ₹95.

According to recent grey market activities over the last 8 sessions, the current GMP of ₹5 indicates a downward trend. As per experts at investorgain.com, the lowest GMP stands at ₹0, while the highest GMP is ₹22.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.