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Synopsis: Garuda Construction and Engineering Ltd has launched an IPO to raise Rs 264.10 crore, with a focus on expanding its capital base for growth in the infrastructure sector. The company shows strong financials, a substantial order book, and reduced debt, making it attractive for long-term investment. While some brokerage firms recommend caution due to past group-level financial challenges, others highlight its strong growth potential and operational efficiency.
Garuda Construction and Engineering Ltd's IPO, opening on October 8 and running until October 10, offers investors a unique opportunity in the infrastructure sector. The IPO consists of a fresh issue of 1.83 crore shares, valued at Rs 173.85 crore, and an offer-for-sale (OFS) of 95 lakh shares worth Rs 90.25 crore by its promoter, PKH Ventures. The price band is set between Rs 92 and Rs 95 per share, with a minimum lot size of 157 shares.
The company, founded in 2010, provides a wide range of services including construction for residential, commercial, and industrial projects, alongside additional infrastructure services like mechanical, electrical, and plumbing (MEP) and operation and maintenance (O&M). As of September 2024, Garuda had an impressive order book valued at Rs 1,408 crore, reflecting strong business visibility.
Use of Proceeds The funds raised will primarily go toward working capital needs, potential acquisitions, and general corporate purposes. Ahead of its IPO, Garuda raised Rs 75 crore from key anchor investors including AG Dynamic Funds Trust Mutual Fund and Maybank Securities.
Financial Overview Garuda Construction has seen steady growth. In FY24, the company reported revenue of Rs 154.47 crore and a net profit of Rs 36.44 crore. Its robust financials, alongside an order book 9.2 times its sales, suggest a strong future trajectory, with a reduced debt profile further enhancing its attractiveness.
Brokerage Recommendations
Anand Rathi: Recommends subscribing for long-term due to Garuda's proven project execution capabilities and growing order book.
Canara Bank Securities: Advises caution, citing concerns over financial strategy and group-level challenges, giving the IPO an 'avoid' rating.
Swastika Investmart: Suggests subscribing with caution for high-risk investors due to the company’s project diversification and strong order book.
Arihant Capital: Encourages a 'subscribe for listing gains' given the company's operational strengths and marquee project executions.
StoxBox: Highlights Garuda’s debt-free status and recommends subscribing from a long-term perspective due to favorable price-to-earnings ratios and robust growth.
SMIFS: Recommends a 'subscribe' rating, praising Garuda's asset-light model and geographic expansion, which position it well in India's growing construction market.
Disclaimer: This is not financial advice. Investors should carefully assess their risk tolerance before making investment decisions.
