Garuda Construction and Engineering IPO booked 4.10x on Day 2 ; GMP, subscription status. Should you buy?

Garuda Construction IPO: Garuda Construction and Engineering's initial public offering sailed through quite well on the second bidding day, with retail, non-institutional investors (NIIs), and qualified institutional buyers (QIBs) participating largely together. 

On the first bidding day, Garuda Construction IPO had a strong start attracting significant interest from retail and NIIs. However, QIBs were yet to see full participation.

On Monday, October 7, the company announced that it had secured ₹75 crore from anchor investors. The company has set a price band of ₹92-95 per share for its ₹264-crore initial public offering, which commenced on October 8 and will end on October 10.

QIBs have been allocated half of the issue size, while 35% is earmarked for retail investors, and the remaining 15% is set aside for NIIs. Investors who are interested can bid for a minimum of 157 equity shares and in multiples of 157 equity shares thereafter.

The company offers comprehensive civil construction services for residential, commercial, and infrastructure projects, including workplaces, hotels, and additional services for commercial and infrastructural projects. Civil construction encompasses the construction of concrete and composite steel structures and the erection of 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 Day 2 

The initial public offer of Garuda Construction and Engineering has been subscribed 4.10 times on the second day of subscription today, as per BSE data.

The initial share sale received bid for 8,16,77,366 shares against 1,99,04,862 shares on offer, according to BSE data.

The portion for retail investors received 6.73 times subscription while the quota for non-institutional investors got subscribed 2.58 times. The qualified institutional buyers (QIBs) part is booked 91%.

Garuda ConstructionIPO subscription status was 1.91 times on the first day of subscription, as per BSE data.

Retail investors' portion was oversubscribed by 3.43 times, while the non-institutional investors' quota received 1.10 times subscription. The QIBs part was 2% subscribed.

Garuda Construction IPO Review

BP Equities Pvt Ltd

The brokerage stated that the company has a track record of successfully completing projects including buildings for residential, commercial, and hospitality uses. India's construction sector is the second largest contributor to the country's economy, behind agriculture.

The company's sales quadrupled from 77.0 crores in FY22 to 154.2 crores in FY24, demonstrating an exceptional 26.0% annual growth rate. Additionally, it saw a 24.7% annual growth rate in profit after tax, rising from Rs. 18.8 crores in FY22 to Rs. 36.4 crores in FY24. Other industry businesses' average debt-to-equity ratios varied from 0.23x to 0.66x during FY19 to FY23; nevertheless, the company lowered its debt and is debt-free in FY23.

"With an order book worth Rs. 1,408 crores, which is 9.2 times its sales, and an IPO priced at a reasonable Price-to-Earnings (P/E) ratio of 19.5x based on FY24 earnings, we recommend a "SUBSCRIBE" rating for this IPO from a long-term perspective

Stoxbox

As per the brokerage, other companies in the industry had an average debt-to-equity ratio ranging from 0.23x to 0.66x between FY19 and FY23. However, the company managed to reduce its debt and is now debt-free in FY23. It has an order book valued at Rs. 1,408 crores, which is 9.2 times its sales. Additionally, the IPO is priced reasonably with a Price-to-Earnings (P/E) ratio of 19.5x based on FY24 earnings. Due to these factors, the brokerage has recommended a "SUBSCRIBE" rating for this IPO.

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 funds raised from the fresh offering will be utilised to meet operational funding needs and for general business uses, including possible non-organic acquisitions.

Corpwis Advisors Private Ltd has been appointed as the exclusive book-running lead manager for the offering, with Link Intime India Private Ltd serving as 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 the trends of the grey market over the previous nine sessions, the current GMP ( ₹5) is indicating a downward trend. Investorgain.com analysts say that the lowest GMP is ₹0 and the maximum 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.