The initial public offering (IPO) of Garuda Construction and Engineering saw a decent response from the investors during the initial few hours of the bidding process on day one. The issue, which kicked-off for bidding on Tuesday, October 08, was mostly subscribed by retail and HNI investors, leading to full subscription.
Garuda Construction and Engineering is selling its shares in the price band of Rs 92-95 apiece. Investors can apply for a minimum of 157 shares and its multiples thereafter. It is looking to raise Rs 264.10 crore via IPO, which includes a fresh share sale of 173.85 crore and an offer-for-sale of up to Rs 95 lakh shares by its promoter PKH Ventures.
According to the data, the investors made bids for 3,01,48,867 equity shares, or 1.51 times, compared to the 1,99,04,862 equity shares offered for the subscription by 2.45 pm on Tuesday, October 08. The three-day bidding for the issue will conclude on Thursday, October 10.
The allocation for retail investors was subscribed 2.78 times, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 74 per cent. However, the quota set aside for qualified institutional bidders (QIBs) quota was yet to see any bids for their allocations as of the time.
Mumbai-based Garuda Construction and Engineering, founded in 2010, provides comprehensive construction services for residential, commercial, residential/commercial, infrastructure, and industrial projects, as well as additional services for infrastructure and hospitality projects.
The grey market premium (GMP) for the Garuda Construction and Engineering has seen a sharp correction in the last few hours. Last heard, the company was commanding a premium of Rs 5 in the unofficial market, suggesting a listing pop of about 5-6 per cent for the investors. The premium in the unofficial market stood at Rs 22 a couple of days ago.
Brokerage firms, largely have a positive view on the issue and suggest to subscribe for a long term citing its diversification, strong order book, better return ratios. On the other hand, sluggish financial performance, cyclical nature of business and negative cash flows are the major concerns for the issue.
The company has a strong order book and project diversification are key strengths of the business. The PE ratio is in line with industry peers, but the return on net worth is superior. FY23 saw strong growth in revenue and profit, while FY24 was sluggish due to the election year, said Tradingo, suggesting high risk investors can consider applying to the IPO for the long-term.
Ahead of its IPO, Garuda Construction raised Rs 75 crore from seven anchor investors as it allocated 78,95,138 shares for Rs 95 per share. The company has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) have 15 per cent of the allocation. Retail investors will get the remaining 35 per cent of the net offer.
Garuda Construction reported a net profit of Rs 3.5 crore with a revenue of Rs 11.88 crore for the month of April 30, 2024. The company reported a net profit of Rs net profit of Rs 36.44 crore with a revenue of Rs 154.47 crore for the financial year ended on March 31, 2024.
The promoter group's previous attempt to launch an IPO for PKH Ventures in 2023 has to be withdrawn as the minimum subscription of 90 per cent was not met, raising questions about the group's broader financial strategy. Its financial health remains a key focus area due to elevated receivables and reliance on internal contracts, said Canara Bank Securities.
"While the company has a solid order book and ambitions to expand, investors should weigh the potential growth against the risks stemming from cash flow constraints and past group-level challenges. Hence, caution is advised for this offering," it added with an 'avoid' rating for the issue.
Corpwis Advisors is the sole book running lead manager of the Garuda Construction and Engineering IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with October 15, Tuesday as the tentative date of listing.