Strong Listing: Garuda Construction & Engineering Makes Healthy Debut At 9.5% Premium On Exchanges; BUY?

Garuda Construction and Engineering Limited made a healthy debut on the stock market today, with its shares listing at Rs 105 on the National Stock Exchange (NSE), reflecting a 9.5% premium over its initial public offering (IPO) price of Rs 95. The company's stock also opened on the Bombay Stock Exchange (BSE) at Rs 103.20, up 8.63% from its issue price.

The Rs 264.10 crore Garuda Construction and Engineering IPO, open for subscription from 8th to 10th October 2024, was met with overwhelming demand across all investor categories. The price band for the public issue was set at Rs 90-95 per share, and the IPO saw an overall subscription of 7.55 times, with bids for 15.03 crore shares against the 1.99 crore shares on offer.

Retail investors played a pivotal role in the IPO's success, with their segment being oversubscribed 10.81 times. Non-Institutional Investors (NII) showed equally strong interest, with their quota subscribed 9.03 times. Meanwhile, the Qualified Institutional Buyers (QIB) portion was bid 1.24 times, indicating moderate interest from larger institutional players.

IPO Details

The Garuda Construction and Engineering IPO was a mix of both fresh issuance and an offer for sale (OFS). The fresh issue involved 1.83 crore shares, raising Rs 173.85 crore, while the OFS component, which consisted of 0.95 crore shares, contributed Rs 90.25 crore. The primary aim of the IPO was to meet the company's working capital requirements, cover general corporate expenses, and support potential acquisitions in the future.

Retail investors could apply in lots, with one lot consisting of 157 shares. The minimum investment required was Rs 14,915. Corpwis Advisors Private Limited acted as the book-running lead manager for the IPO, and Link Intime India Private Ltd served as the registrar.

Shivani Nyati, Head of Wealth at Swastika Investmart Ltd said, "The company made a decent debut at ₹105 per share, which is a 10.5% premium over its issue price. This positive performance is unexpected, especially given the pre-listing expectations of a flat or even negative listing due to the modest grey market premium and the cyclical nature of the infrastructure industry."

Nyati attributed GCEL's successful listing to its strong order book, diversified project portfolio, and superior return on net worth. Although the company's growth slowed in FY24 due to it being an election year, its overall financial health remains strong. She advised investors who participated in the IPO to monitor the company's performance and maintain a cautious approach. "It's wise to hold with a stop loss around the issue price to safeguard gains," she added.

About Garuda Construction and Engineering

Established in 2010, Garuda Construction and Engineering Limited has grown to become a major player in the Indian construction sector. The company offers a wide array of services, including residential, commercial, infrastructure, and industrial project construction. Additionally, it provides operation and maintenance (O&M), mechanical, electrical, and plumbing (MEP) services, along with finishing works as part of its comprehensive construction solutions.

Despite its strong market presence, Garuda has faced some financial headwinds. For the fiscal year ending March 31, 2024, the company reported a 4% decline in revenue and an 11% drop in profit after tax (PAT) compared to the previous year. Nevertheless, its fundamentals and expansion plans provide a hopeful outlook for the future.