Garuda Construction and Engineering IPO: Last Day to Apply! GMP Drops to ₹5 – Should You Buy or Wait?

The IPO of Garuda Construction and Engineering Limited opened on 8th October 2024 and will close on 10th October 2024. This means investors have only one day left to apply. The IPO has received a decent response from investors in all categories. However, the grey market remains cautious, with the IPO’s shares trading at a ₹5 premium today.

Grey Market Premium (GMP)

The current grey market premium (GMP) for Garuda Construction and Engineering Limited’s IPO is ₹5, a drop from ₹10 yesterday and a sharp fall from ₹20 two days ago. This means the GMP has decreased by 75% in just two days.

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Subscription Status

After two days of bidding, the IPO has been subscribed 4.10 times overall. The retail portion is oversubscribed 6.73 times, the Non-Institutional Investor (NII) portion 2.58 times, and the Qualified Institutional Buyers (QIB) portion 0.91 times.

Review of Garuda Construction IPO

Anshul Jain, Head of Research at Lakshishree Investment and Securities, recommends buying the IPO. He highlights that Garuda Construction has shown impressive growth, with revenue increasing from ₹7,702.08 lakh in FY22 to ₹15,417.83 lakh in FY24, reflecting a strong 26.03% CAGR (Compound Annual Growth Rate). The IPO funds will help the company expand and possibly pursue acquisitions. With a current GMP of ₹5, the estimated listing price could be around ₹100, offering a potential gain.

Jain notes the construction sector in India is booming, with government support and rising demand. This could make India the third-largest construction market globally by 2030. Financially, Garuda Construction’s revenue doubled between FY22 and FY24, with profits growing at a steady rate. The company has also become debt-free and has an order book worth ₹1,408 crores, about 9.2 times its sales. With an attractive Price-to-Earnings (P/E) ratio of 19.5x, Jain recommends subscribing to the IPO for long-term gains.

On the other hand, SEBI-registered analyst VLA Ambala advises investors to avoid the IPO. Ambala warns that while the company’s financial growth looks strong, its trade receivables are higher than its revenues, which raises concerns. Additionally, the IPO comes at a time when the Indian market is showing signs of weakness, which could negatively impact its listing. Ambala suggests that investors look for better opportunities in companies that are currently undervalued.

Important Dates

The IPO allotment is expected to be finalised on 11th October 2024, with the listing likely on 15th October 2024.