Garuda Construction IPO (Full Analysis) | GMP Today | Upcoming IPO in stock market for beginners

Summary

Garuda Construction & Engineering is launching a ₹2,264 crore IPO from October 8-10. This Mumbai-based civil engineering company offers construction and maintenance services for residential, commercial, and industrial projects. The company's IPO aims to fulfill working capital requirements and possible acquisitions. It has a market cap of ₹883 crore and impressive financials, including a 36% return on equity. However, concerns include high revenue dependence on a few clients and inconsistent financial performance. The IPO listing will take place on October 15, with shares available on both NSE and BSE.

Takeaways

• 🏗️ Garuda Construction and Engineering's ₹2264 crore IPO is set to open between October 8 and 10.
• 📈 This is the first mainboard IPO of the month, with a GMP (Grey Market Premium) already available.
• 🏢 The company is a Mumbai-based civil engineering firm providing construction, maintenance, and services for residential, commercial, and industrial projects.
• 🔧 Garuda offers services like electrical, plumbing, and mechanical work alongside building maintenance.
• 💰 The company's financials indicate a market capitalization of ₹883 crore, with strong fundamentals like 36% Return on Equity and 46% Return on Capital Employed.
• 📉 Despite a decrease in revenue and profit in FY2024 compared to FY2023, it has a minimal debt burden, making it almost debt-free.
• 🛠️ The IPO is aimed at meeting working capital needs and potential inorganic acquisitions.
• 📊 The IPO is valued fairly compared to competitors like PSP Projects and Capacit’e Infraprojects, with a P/E ratio of 21.
• 💼 Around 50% of the IPO shares are reserved for QIBs (Qualified Institutional Buyers), 35% for retail investors, and 15% for HNIs (High Net-worth Individuals).
• ⚠️ Key risks include high client concentration, dependence on top 10 clients for revenue, and inconsistent financials due to the nature of the construction industry.

Q & A

What is the IPO size of Garuda Construction and Engineering?

The IPO size of Garuda Construction and Engineering is ₹2264 crore.

When is the IPO of Garuda Construction and Engineering opening?

The IPO is opening between 8th and 10th October.

What kind of business does Garuda Construction and Engineering engage in?

Garuda Construction and Engineering is a Mumbai-based civil engineering company that provides construction services for residential, commercial, and industrial projects. It also offers maintenance, electrical, plumbing, and mechanical services.

What are the financial metrics of Garuda Construction and Engineering's IPO?

The company's market cap for the IPO is ₹883 crore, return on equity (ROE) is 36%, and return on capital employed (ROCE) is 46%. The profit after tax margin is 23.6%.

What is the company's revenue and profit trend over the last three years?

In 2022, the revenue was ₹77 crore, which increased to ₹161 crore in 2023 but slightly decreased to ₹154 crore in 2024. The profit after tax grew from ₹18 crore in 2022 to ₹40 crore in 2023, and then declined to ₹36 crore in 2024.

Why is the company bringing out this IPO?

The company aims to use the IPO proceeds to meet its working capital requirements and for potential inorganic acquisitions.

What are the company's strengths (pros) as highlighted in the script?

The company operates in the growing infrastructure development sector, has a good return on equity and capital employed, is almost debt-free, and has a higher profit margin compared to sector averages. It also has an order book of approximately ₹200 crore.

What are the potential risks (cons) associated with Garuda Construction and Engineering?

The company's revenue is highly dependent on its top 10 clients, making it vulnerable to economic changes and project availability. Additionally, its parent company, PKH Ventures, withdrew its IPO in July 2023 due to poor market conditions.

What is the GMP (Grey Market Premium) of this IPO?

The GMP for Garuda Construction and Engineering's IPO is currently around ₹10.

How much investment is required for a single lot in this IPO?

To apply for one lot in this IPO, you need to invest ₹14,491 for 157 shares.