Garuda Construction IPO subscribed 3.25 times on Day 2 so far; check details

The initial public offering (IPO) of Garuda Construction and Engineering continued to see a decent response from the investors during the second day of the bidding process. The issue, which kicked-off for bidding on Tuesday, October 08, was booked 1.9 times by the end of day one.

Garuda Construction and Engineers 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 6,47,55,906 equity shares, or 3.25 times, compared to the 1,99,04,862 equity shares offered for the subscription by 1.45 pm on Wednesday, October 09. The three-day bidding for the issue will conclude on Thursday, October 10.

The allocation for retail investors was subscribed 5.81 times, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 1.95 times. However, the quota set aside for qualified institutional bidders (QIBs) quota was yet to see any bids for their allocations and was booked only two per cent 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 following a muted response for the issue. Last heard, the company was commanding no premium in the unofficial market, suggesting a negligible  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The promoter group's previous attempt to launch an IPO for PKH Ventures in 2023 had to be withdrawn as the minimum subscription of 90 per cent was not met, raising questions about the group's broader financial strategy.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.

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.

With an order book worth Rs 1,408 crore, which is 9.2 times its sales, and an IPO priced at a reasonable price-to-earnings (P/E) ratio of 19.5 times based on FY24 earnings, we recommend a 'subscribe' rating for this IPO from a long-term perspective, said BP Equities.

With a dedicated team of engineers, architects, and project managers, Garuda ensures high-quality standards at every stage of the project, from planning and design to execution and maintenance, said Ventura Securities. "It is committed to sustainability and innovation, implementing green building practices and utilizing eco-friendly materials," it added without rating 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.