Evaluating Garuda Construction and Engineering Ltd IPO opportunity; Should you invest?
The company is actively involved in multiple construction projects, with a total order book amounting to Rs 1,408 crore.
About the issue
Garuda Construction and Engineering Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
October 08, 2024 |
| IPO Closing Date |
October 10, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 5 per equity share |
| IPO Price |
Rs 92 to Rs 95 per equity share |
| Min Order Quantity |
157 shares |
| Listing At |
BSE, NSE |
| Total Issue |
27,800,000 shares of FV Rs 5* |
| (Aggregating up to Rs 264.10 Cr)* |
| Fresh Issue |
18,300,000 shares of FV Rs 5* |
| (Aggregating up to Rs 173.85 Cr)* |
| Offer for Sale |
9,500,000 shares of FV Rs 5* |
| (Aggregating up to Rs 90.25 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Working capital requirements of the company
2. Unidentified inorganic acquisitions and general corporate expenses.
Promoter holding
Pravinkumar Brijendra Kumar Agarwal, PKH Ventures Limited and Makindian Township Private Limited are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 96.81 per cent in the company.
Company profile
Garuda Construction and Engineering Ltd is a civil construction company offering comprehensive end-to-end services across residential, commercial, residential-cum-commercial, infrastructure, industrial, and hospitality projects.
Its civil construction services encompass every stage from detailed route surveys, design, and engineering to resource mobilisation, micro-scheduling of construction activities, obtaining necessary permissions, conducting soil and water testing, hiring contractors and manpower, procuring materials, performing lab tests, executing construction as per the approved plan, and finally delivering the completed project in line with agreed terms.
In addition to its core construction services, the company also offers operation and maintenance (O&M) services, mechanical, electrical, and plumbing (MEP) services, as well as finishing works, enhancing its comprehensive construction solutions.
Currently, the company is engaged in the civil construction of six residential projects, two commercial projects, one industrial project, and one infrastructure project, with an order book totalling Rs 1,408 crore.
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Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
| Revenue |
77.03 |
161.02 |
154.47 |
| Profit before tax |
24.78 |
55.09 |
49.65 |
| Net profit |
18.78 |
40.8 |
36.44 |
Despite achieving significant topline and bottom-line growth in FY23, the company was unable to sustain this momentum in FY24. The annualized revenue for FY25 showed a marked decline, with the company reporting a revenue of just Rs 11.88 crore in April 2024. The company's trade receivables stood at Rs 176.24 crore as of March 31, 2024, and further increased to Rs 182.56 crore by April 30, 2024, exceeding the reported topline figures. This raises significant concerns and is a matter of serious worry.
Valuation and outlook
| Company Name |
P/E |
P/B |
RoE (%) |
| Garuda Construction and Engineering Ltd |
24 |
5.97 |
31 |
| Listed Peers |
| PSP Projects Ltd |
21 |
2.14 |
14 |
| Capacit'e Infraprojects Ltd |
21 |
2.05 |
9 |
| Vascon Engineers Ltd |
21 |
1.4 |
7 |
| Ahluwalia Contracts (India) Ltd |
21 |
4.55 |
27 |
| B.L. Kashyap and Sons Ltd |
32 |
3.94 |
11 |
The issue is priced with a P/BV ratio of 5.97 times, calculated using its Net Asset Value (NAV) of Rs 15.92 as of March 31, 2024. When we calculate the PE ratio for the company by considering the FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 24. As a result, the issue appears to be relatively aggressively priced.
Last year, group company PKH Ventures withdrew its IPO due to poor investor response in challenging market conditions. Given the company's inconsistent financial performance, elevated trade receivables relative to revenue, and aggressive valuation, we recommend skipping this IPO without hesitation.