Market Correction: Garuda Construction and Engineering IPO

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Amid the ongoing market correction, a new IPO has emerged: Garuda Construction and Engineering. Let’s first take a look at the gray market premium associated with this IPO.

The issue price of the IPO has been set at ₹95. Initially, the gray market premium started at around ₹25, but due to the market correction, it has now dropped below ₹10. This indicates that in the retail segment, if a lot is allotted, a profit of only ₹1,000 is expected, while the HNI category anticipates a profit of ₹15,000.

Company Background

Garuda Construction was established in 2010 and provides services in residential, commercial, and infrastructure projects.

IPO Dates

Opening: October 8 to 10
Allotment: October 11
Cut-off Date: October 15

A single lot will consist of 157 shares. The size of the issue is ₹264 crore, which is relatively small in the current market scenario.

Financial Overview

Looking at the company’s financials, total assets are approximately ₹234 crore, with revenue growing at a good rate. However, there has been an 11% decline in profit after tax when comparing 2023 to 2024.

The company’s market capitalization stands at around ₹883 crore, with a 36% return on equity. Additionally, the EPS is ₹4.52, and the P/E ratio is about 21.

Internal Risks

Despite its strengths, the company faces some internal risks. For instance, 90-95% of its revenue comes from the top five clients, indicating a concentration risk. Moreover, there are pending government payments.

Additionally, legal proceedings against the company’s promoters and directors could raise concerns for investors.

Conclusion

In a normal market situation, this IPO appears to be mediocre, especially for moderate to aggressive investors. If the market closes above 25,000 this week, I will consider investing in this IPO. However, if it falls below 25,000, it will fall into the risky IPO category.

What are your thoughts? Please share in the comments. All important links are provided in the description, so make sure to check them out!

Garuda Construction and Engineering IPO Apply or Not