Garuda Construction and Engineering Limited Company is coming up with an IPO size of Rs. 264.10 crore. The company is going for fresh issues of Rs. 173.85 crore and an offer for sale of Rs. 90.25 crore, which will open on 8th October 2024. The issue will close on 10th  October 2024 and be listed on the exchange on 15th October 2024. This article will examine the Garuda Construction and Engineering IPO, evaluating its strengths and weaknesses. Let’s dive in!

Garuda Construction and Engineering IPO – About the Company

Garuda Construction and Engineering Limited, founded in 2010, has its headquarters in Mumbai, Maharashtra, India. The company specialises in civil construction for residential, commercial, and industrial projects, as well as infrastructure development. Initially, Garuda focused on in-house construction for its promoter group. However, the company has since expanded its scope, venturing into contracts with third parties and aiming to take on larger roles as a developer.

Over the years, Garuda has completed several notable projects. For instance, in 2014, they finished the Golden Chariot Vasai Hotel & Spa. Subsequently, in 2021, they concluded the construction of the Delhi Police Headquarters, a marquee project featuring twin seventeen-story towers. Currently, Garuda is engaged in multiple projects across various sectors, including residential, commercial, industrial, and infrastructure.

Project List 

Garuda Construction and Engineering Limited has successfully completed several significant projects. Notably, they constructed the Golden Chariot Vasai Hotel & Spa in the Mumbai Metropolitan Region. Additionally, the company renovated and refurbished the Golden Chariot Boutique Hotel in Andheri (East), Mumbai. Furthermore, Garuda played a crucial role in the construction of the Delhi Police Headquarters.

Currently, the company is engaged in various ongoing and upcoming projects. These include a turnkey contract for an Agro Processing Cluster in Jalore District, Rajasthan. Moreover, Garuda is working on residential projects such as Garuda Shatrunjay in Borivali West, Mumbai. The company is also undertaking industrial projects, including civil work for a hydro project with various components like intake structures and surge shafts. These diverse projects showcase Garuda’s versatility and expertise in different construction sectors.

Garuda Construction and Engineering IPO – Industry Overview

Garuda Construction and Engineering Limited operates in India’s thriving construction sector, which is the country’s second-largest economic segment after agriculture. The sector contributed 8.4% to the national GVA in FY23 and has shown remarkable resilience. Despite a setback in FY21 due to COVID-19, the construction industry has rebounded strongly, growing at a CAGR of 10.6% from FY18 to FY23.

Looking ahead, the sector is projected to expand from ₹3,922 billion in FY23 to ₹6,494 billion by FY30, at a CAGR of 7.5%. This growth is primarily driven by increased government spending on infrastructure projects. Furthermore, 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, presenting numerous opportunities for growth and expansion in the coming years.

Garuda Construction and Engineering IPO – Financial Highlights

Garuda Construction and Engineering Limited has demonstrated impressive financial growth over recent years. The company’s revenue from operations has 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%. Simultaneously, the profit after tax has shown a significant increase, rising from ₹18.78 crores to ₹36.44 crores during the same period, marking a CAGR of 39.29%.

Notably, Garuda’s operating profit margin has outperformed its peers in the construction sector. For FY23, the company achieved a remarkable 34.80% margin, substantially higher than the peer average of 16.90%. Furthermore, Garuda’s average operating margin over the last three years stood at an impressive 30%, doubling the industry average of 15%.

However, it’s worth noting that a significant portion (35.39%) of Garuda’s ongoing projects are with Group Companies and Promoter Related entities. While this indicates a strong intra-group reliance, the company is actively diversifying its portfolio. Presently, 64.61% of their total ongoing projects involve contracts with unrelated entities.

Looking ahead, Garuda is venturing into new construction areas, including roles as a joint developer in residential projects and expanding into industrial projects like dam construction. These strategic moves aim to broaden the company’s expertise and client base. Nevertheless, this expansion into unfamiliar territories presents potential risks, including non-performance and project delays due to limited experience outside their established group framework.

Peers of the Company

Garuda Construction and Engineering Limited’s peer competitors include PSP Projects Limited, Capacite Infraprojects Limited, Vascon Engineers Limited, Ahluwalia Contracts (India) Limited, and B L Kashyap & Sons Limited. Despite having a lower face value per share compared to most of its peers, Garuda Construction boasts a significantly higher return on net worth at 36.14%.

The below images show the comparison of peer competitors of Garuda Construction and Engineering Limited:

Strengths of the Company

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

• Proven track record: Successfully executed diverse projects, including hospitality and residential buildings in the MMR.

• Strong project management: Emphasises timely completion and high-quality construction, utilising an asset-light model for equipment deployment.

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

• Experienced leadership: Led by promoter Pravin Kumar Agarwal with over two decades of business experience, supported by a skilled management team.

• Growing order book: As of the RHP filing date, ongoing and upcoming projects totalled ₹1,40,827.44 lakhs, indicating future growth potential.

Weaknesses of the Company

• Raw material price sensitivity: Vulnerable to fluctuations in material costs, potentially impacting project profitability.

• Regulatory delays: Susceptible to setbacks in obtaining clearances and approvals, affecting project timelines.

• Intense competition: Operates in a highly competitive industry, challenging contract acquisition and market share retention.

• Scaling challenges: Faces complexities in scaling up project execution and managing large-size projects effectively.

• Contractual obligations: Must consistently meet contractual requirements to avoid penalties and maintain reputation.

• Real estate market risks: May encounter difficulties in flat saleability and land acquisition, particularly in volatile market conditions.

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

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Garuda Construction and Engineering IPO – GMP

The shares of Garuda Construction and Engineering Limited’s price in the grey market were trading at a 0% premium as of 3rd October 2024. The shares in Grey Market traded at Rs 95. This gives it a premium of Rs. 0 per share over the cap price of Rs. 95.

Garuda Construction and Engineering IPO – Key IPO Information

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

Book Running Lead Manager: Corpwis Advisors Private Limited

Registrar to the Offer: Link Intime India Private Limited

The Objective Of The Issue

• Garuda Construction and Engineering Limited primarily aims to secure funds for working capital requirements. This strategic move will bolster the company’s operational capabilities and financial flexibility.

• The offer allocates resources for general corporate expenses and potential unidentified inorganic acquisitions. Consequently, this approach provides Garuda with the means to address unforeseen business needs and pursue growth opportunities through strategic acquisitions.

• By listing on the BSE Limited and National Stock Exchange of India, Garuda seeks to enhance its corporate image and brand repequity. Furthermore, this public listing will create a market for its Equity shares in India, potentially unlocking the company’s true value.

• The company anticipates that the listing will significantly increase credibility among the public, suppliers, investors, and customers. As a result, Garuda expects to improve its standing in the marketplace and strengthen relationships with key stakeholders.

Conclusion

In summary, Garuda Construction and Engineering Limited stands out as a promising contender in the construction and infrastructure sector, focusing on civil construction for residential, commercial, and industrial projects. The company’s comprehensive project portfolio caters to crucial sectors such as real estate and public infrastructure. With a solid domestic foundation and aspirations for larger roles as a developer, Garuda is well-positioned for growth.

Moreover, the company’s dedication to timely completion and high-quality construction, evidenced by its strong project management and asset-light model, enhances its competitive advantage. Although Garuda faces challenges like raw material price sensitivity and regulatory delays, its strategic expansion into new construction areas and impressive financial performance mitigate some risks. Furthermore, the company’s experienced leadership and growing order book indicate potential for future success.

All things considered, the IPO offers investors a chance to get involved in India’s rapidly expanding infrastructure and construction industry. However, it’s worth noting that Garuda’s expansion into unfamiliar territories may pose some risks. Nonetheless, the company’s robust financial growth and strong market position make it an intriguing prospect.

What are your thoughts on Garuda Construction and Engineering Limited? We’d love to hear your perspective in the comments below.

Written By Fazal Ul Vahab

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.

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