Garuda Construction & Engineering IPO

Garuda Construction and Engineering Limited Company is planning an IPO size of Rs. 264.10 crore. The company is going for a fresh issue of Rs. 173.85 crore and offer for sale of Rs. 90.25 crore, will be launched on October 8, 2024. The issue closes on October 10, 2024 and will be listed on exchanges on October 15, 2024. In this article, we will examine the Garuda Construction & Engineering IPO to evaluate its strengths and weaknesses. Let’s jump in!

Garuda Construction & Engineering IPO – About Us

Established in 2010, Garuda Construction and Engineering Limited is headquartered in Mumbai, Maharashtra, India. The company specializes in civil construction and infrastructure development for residential, commercial and industrial projects. Initially, Garuda focused on the internal construction of the promoter group. However, the company has since expanded its scope, aiming to contract with third parties and take on a larger role as a developer.

Over the years, Garuda has completed several notable projects. For example, in 2014, the Golden Chariot Vasai Hotel & Spa was completed. Then, in 2021, they wrapped up the construction of the Delhi Police Headquarters, a megaproject featuring twin 17-story towers. Currently, Garuda is participating in several projects across various sectors including residential, commercial, industrial, and infrastructure.

Project List

Garuda Construction and Engineering Limited has successfully completed several important projects. Notably, they built the Golden Chariot Vasai Hotel & Spa in the Mumbai Metropolitan Region. The company also renovated and refurbished Golden Chariot Boutique Hotel in Andheri (East), Mumbai. Moreover, Garuda also played an important role in building the Delhi Police Headquarters.

Currently, the company is working on a variety of ongoing and upcoming projects. This includes a turnkey contract for an agro-processing cluster in Jalore district of Rajasthan. Garuda is also working on residential projects such as Garuda Shatrunjay in Borivali West, Mumbai. The company also undertakes industrial projects including civil engineering for hydraulic projects with various components such as suction structures and surge shafts. These diverse projects demonstrate Garuda’s versatility and expertise in various construction sectors.

Garuda Construction & Engineering IPO – Industry Overview

Garuda Construction and Engineering Limited operates in India’s thriving construction sector, the country’s second largest economic sector after agriculture. The sector contributed 8.4% to the country’s GVA in FY23 and has shown remarkable resilience. Despite the slump caused by COVID-19 in 2021, the construction industry showed a strong rebound, growing at a CAGR of 10.6% between 18 and 23.

Going forward, the sector is expected to expand at a CAGR of 7.5% from Rs 3,922 billion in FY23 to Rs 6,494 billion by FY30. This growth is primarily driven by increased government spending on infrastructure projects. Additionally, the construction sector is expected to contribute 15% to the Indian economy by 2030, potentially making India the third-largest construction market globally. This positive outlook bodes well for companies like Garuda and presents numerous opportunities for growth and expansion in the coming years.

Garuda Construction & Engineering IPO – Financial Highlights

Garuda Construction and Engineering Limited has shown impressive financial growth in recent years. The company’s operating revenue surged from ₹77.02 crores in fiscal 2022 to ₹154.18 crores in fiscal 2024, reflecting a robust compound annual growth rate (CAGR) of 41.4%. At the same time, profit after tax saw a significant increase, increasing from ₹18.78 crores to ₹36.44 crores during the same period, registering a CAGR of 39.29%.

In particular, Garuda’s operating profit margin is overwhelming compared to the construction industry. In FY23, the company achieved an impressive margin of 34.80%, well above its peer average of 16.90%. Moreover, over the past three years, Garuda’s average operating margin has been an impressive 30%, double the industry average of 15%.

However, it is worth noting that a significant portion (35.39%) of Garuda’s ongoing projects involve group companies and promoter-related entities. While this means there is a high level of dependence within the group, the company is actively diversifying its portfolio. 64.61% of all ongoing projects involve contracts with unrelated companies.

Garuda is entering new construction sectors in the future, including its role as a co-developer of residential projects and expansion into industrial projects such as dam construction. This strategic move aims to expand the company’s expertise and customer base. Nonetheless, this expansion into unfamiliar territory carries potential risks, including default and project delays due to limited experience outside the existing group framework.

coworker

Garuda Construction and Engineering Limited’s peer competitors include PSP Projects Limited, Capacite Infraprojects Limited, Vascon Engineers Limited, Ahluwalia Contracts (India) Limited and BL Kashyap & Sons Limited. Garuda Construction boasts a fairly high return on net assets of 36.14%, despite having a lower par value per share compared to most of its peers.

The image below compares Garuda Construction and Engineering Limited’s peers.

Company Strengths

• Focused business approach: We specialize in the civil construction of residential and commercial buildings, developing core competencies and technical expertise.

• Proven track record: We have successfully delivered a variety of projects including hospitality and residential buildings for MMR.

• Powerful Project Management: Utilizes an asset-light model for equipment deployment, emphasizing timely completion and high-quality construction.

• Strong financial performance: Demonstrated consistent growth in revenue, EBITDA and profit after tax. Interest coverage ratio improved noticeably from 13.0x in FY22 to 146x in FY23.

• Experienced Leadership: It is led by promoter Pravin Kumar Agarwal with over 20 years of business experience and supported by an experienced management team.

• growing order book: The total amount of ongoing and scheduled projects as of the date of submission of RHP is ₹1,40,827.44 lakhs, indicating future growth potential.

company’s weaknesses

• Raw Material Price Sensitivity: Vulnerable to material cost fluctuations, potentially impacting project profitability.

• Regulatory Delays: Delays in obtaining permits and approvals may impact project schedules.

• Fierce competition: We operate in a highly competitive industry and face challenges winning contracts and maintaining market share.

• Expanding Challenges: There are challenges in scaling up project execution and managing large-scale projects effectively.

• Contractual Obligations: To avoid penalties and maintain your reputation, you must consistently meet contractual requirements.

• Real estate market risks: Particularly in unstable market conditions, you may have difficulty selling an apartment or acquiring land.

• Regulatory Impact: Vulnerable to changes in real estate regulations that may impact project viability and compliance costs.

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Garuda Construction & Engineering IPO – GMP

Garuda Construction and Engineering Limited’s gray market price shares were trading at a 0% premium as of October 3, 2024. The stock in Gray Market was trading at Rs 95. This gives a premium of Rs. 0 per share exceeding the ceiling price of Rs. 95.

Garuda Construction & Engineering IPO – Key IPO Information

promoter: Pravinkumar Brijendra Kumar Agarwal, PHK Ventures Limited and Makindian Township Private Limited

Book Operations Lead Manager: Corpwis Advisors Private Limited

Proposal registered by: Link Intime India Private Limited

purpose of the problem

• Garuda Construction and Engineering Limited primarily aims to obtain financing to meet its working capital requirements. This strategic move will strengthen the company’s operational capabilities and financial flexibility.

• The proposal allocates resources for general corporate expenses and potential unidentified mineral acquisitions. As a result, this approach provides Garuda with the means to address unexpected business needs and pursue growth opportunities through strategic acquisitions.

• By listing on BSE Limited national stock exchange Garuda in India is working to improve its corporate image and brand reputation. Additionally, this public listing will create a market for its stock in India, potentially unlocking the company’s true value.

• The company expects that this listing will significantly increase trust among the public, suppliers, investors, and customers. As a result, Garuda expects to strengthen its position in the market and strengthen its relationships with key stakeholders.

conclusion

In summary, Garuda Construction and Engineering Limited stands out as a promising competitor in the construction and infrastructure sector with a focus on civil construction for residential, commercial and industrial projects. The company’s comprehensive project portfolio supports critical sectors such as real estate and public infrastructure. With a solid domestic base and aspirations for a larger role as a developer, Garuda is well positioned for growth.

Additionally, the company’s commitment to on-time completion and high-quality construction, demonstrated through strong project management and asset-light models, strengthens its competitive advantage. Garuda faces challenges such as raw material price sensitivity and regulatory delays, but its strategic expansion into new construction sectors and impressive financial performance mitigate some of the risks. Additionally, the company’s experienced leadership and growing order book indicate potential for future success.

All things considered, the IPO offers investors an opportunity to participate in India’s fast-growing infrastructure and construction industry. However, it is worth noting that Garuda’s expansion into unfamiliar territory may pose some risks. Nonetheless, the company’s solid financial growth and strong market position make it an interesting prospect.

What do you think about Garuda Construction and Engineering Limited? I’d love to hear your perspective in the comments below.

Written by Fazal Ul Vahab

By leveraging the Stock Screener, Stock Heatmap, Portfolio Backtesting and Stock Comparison tools on the Trade Brains portal, investors have access to comprehensive tools to identify the best stocks, stay updated and informed with stock market news. invest.

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