Garuda Construction IPO opens: GMP rises marginally; should you subscribe?

Garuda Construction IPO: The three-day subscription window for the initial public offering (IPO) of Garuda Construction and Engineering opens today. The IPO consists of a fresh issue of 18,300,000 shares and an offer for sale of 9,500,000 shares, each with a face value of Rs 5. The price band for the IPO is set at Rs 92-95 per share, with a lot size of 157 shares. Investors can bid for a minimum of 157 shares and in multiples thereof. The IPO subscription window will close on Thursday, October 10, 2024.

Garuda Construction aims to raise Rs 264.10 crore from the IPO. The company has already secured Rs 75 crore from anchor investors, with bidding having concluded on Monday, October 7, 2024. Meanwhile, unlisted shares of Garuda Construction are trading at a premium of Rs 5, or 56 per cent , over the upper end of the issue price in the grey market, according to sources.

In the Red Herring Prospectus, Garuda Construction outlined its plans to use the IPO proceeds for funding working capital requirements, general corporate expenses, and potential inorganic acquisitions. 

Link Intime India is the registrar for the IPO, while Corpwis Advisors serves as the sole book-running lead manager.

The basis of allotment is expected to be finalised on Friday, October 11, 2024, and shares will be credited to demat accounts by Monday, October 14, 2024. The company is set to debut on the BSE and NSE on Tuesday, October 15, 2024.

Garuda Construction IPO review

Garuda Construction has succeeded in garnering reviews from several brokerages including Anand Rathi Research, SMIFS, and Arihant Capital Markets for its IPO.

Should You Subscribe to the Garuda Construction IPO?

Anand Rathi Research - Subscribe for long term

Analysts at Anand Rathi Research have recommended subscribing to the Garuda Construction IPO from a long-term perspective. The analysts highlighted that the company's primary focus is civil construction of residential and commercial buildings with a track record of successfully executing a diverse mix of construction projects, i.e., residential, hospitality, and commercial projects. The company shows visible growth through an increasing order book and strong project management and execution capabilities to accomplish their projects on schedule while maintaining high construction quality.

According to the analysts, at the upper price band, the company is valued at a P/E of 24.28x, with a market cap of Rs 883.90 crore post-issue of equity shares and a return on net worth of 36.14 per cent . "We believe that the IPO is fully priced and recommend a 'Subscribe-Long term' rating," said the analysts at Anand Rathi Research.

SMIFS - Subscribe

Brokerage SMIFS in its report has assigned a subscribe rating to the Garuda Construction IPO, citing that the company has the highest ROE and ROCE amongst peers with a strong order book reflecting similar growth in the future. The brokerage believes that Garuda Construction is well-positioned in the rapidly growing Indian construction sector, which is expected to expand at a CAGR of 7.5 per cent  until FY30 to Rs 649,400 crore. Garuda’s asset-light business model, which relies on third-party subcontractors for equipment and labour, combined with its focus on geographic expansion beyond the MMR region into states like New Delhi, Karnataka, and Rajasthan, enhances its ability to scale operations efficiently.

"The company’s current order book of Rs 14,08.274 crore, alongside its expansion into development projects, provides a strong pipeline for growth. Garuda’s superior financial performance, including an industry-leading ROE and ROCE of 36.14 per cent  and 46.69 per cent  in FY24, as well as its almost debt-free status, makes it stand out among its peers, ensuring that it is well-positioned to capture new opportunities in the Indian construction market," said the brokerage in its report.

Arihant Capital Markets - Subscribe

Analysts at Arihant Capital Markets remain positive on the Garuda Construction IPO and recommend that investors subscribe to the public issue for listing gains. According to the analysts, Garuda Construction's order book stood at Rs 1,400 crore (9x of FY24 revenue), showing business visibility. READ MORE

About Garuda Construction & Engineers
Garuda Construction & Engineers is a civil construction and engineering company based in Mumbai. Garuda provides end-to-end civil construction for residential, commercial, residential cum commercial, infrastructure, and industrial projects. Garuda also provides services such as operations and maintenance services (O&M) and Mechanical, Electrical, and Plumbing (MEP) services and finishing works as a part of the company's construction services.