Garuda Construction And Engineering Limited IPO Review: Buy Or Avoid?

The initial public offering (IPO) of Garuda Construction and Engineering Limited opened for subscription on October 8, 2024, and will remain available until October 10, 2024.

This leaves investors with a narrow window of opportunity to apply for this much-discussed IPO. Here’s a deep dive into what you should know before making an investment decision.

Garuda Construction IPO: Grey Market Premium (GMP) Insights

According to market analysts, Garuda Construction and Engineering Limited’s shares are being traded at a ₹5 premium in the grey market today, a stark decline from the ₹20 premium recorded earlier this week. This 75% drop in GMP raises concerns among potential investors. Market sentiment appears cautious as the stock’s premium has dropped substantially in a short period, possibly indicating lowered demand or external market influences.

Garuda Construction and Engineering IPO Subscription Status

As of Day 3 of the bidding process, the Garuda Construction IPO has garnered significant interest:

Total subscription: 4.50 times
Retail investor portion: 7.39 times
Non-Institutional Investors (NII): 2.89 times
Qualified Institutional Buyers (QIB): 0.91 times

This indicates that while retail investors are showing strong enthusiasm, institutional investors are more cautious, waiting for further market trends to develop before committing.

Financial Performance and Growth

One of the significant points that make Garuda Construction IPO appealing is its financial growth:

Revenue: From ₹77.0 crore in FY22 to ₹154.2 crore in FY24, representing a CAGR of 26.0%.
Profit after tax: Increased from ₹18.8 crore in FY22 to ₹36.4 crore in FY24.

Additionally, the company is debt-free, which is a strong financial indicator, especially in the construction sector, where debt can often be a burden. With a healthy order book of ₹1,408 crores, the company is positioned for steady future growth.

Key IPO Details

Price band: ₹92 – ₹95 per share
Face value: ₹5
Order book: 9.2x the current sales

Analyst Reviews: Should You Buy Garuda Construction IPO?

Positive Sentiment

Many analysts, including Anshul Jain of Lakshishree Investment, have given the IPO a ‘BUY’ recommendation. The reasoning behind this is:

Financial growth: Strong revenue and profit growth over the past few years.
Debt-free status: This reduces the financial risk.
Order book strength: The company has a solid pipeline of projects.

According to Jain, the company’s potential for expansion, particularly in the construction sector, makes it a promising investment.

Cautious View

However, not all analysts are convinced. SEBI-registered analyst VLA Ambala has recommended avoiding the IPO due to:

High trade receivables: This could affect the liquidity and short-term financial health.
Weak market conditions: The overall weakness in the Indian markets at the time of this IPO launch could dampen its initial performance.

For investors looking for listing gains, Ambala suggests skipping the IPO and instead focusing on well-established companies that are available at discounted prices.

Conclusion: Buy or Avoid Garuda Construction IPO?

The Garuda Construction and Engineering Limited IPO presents a mixed bag of opportunities and risks. The strong financials and debt-free status are significant positives, making it attractive for long-term investors. However, the declining grey market premium and concerns over trade receivables warrant a cautious approach.

Investors looking for listing gains might want to reconsider, while those with a long-term horizon could find this IPO worth the risk.

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Garuda Construction and Engineering Limited IPO Review: Buy or Avoid?