Tue Oct 08 09:31:50 UTC 2024: ## Garuda Construction Debuts on Stock Market with IPO, but Concerns Linger
Garuda Construction and Engineering Ltd. has made its debut on the primary market today, seeking to raise ₹264.10 crore through its initial public offering (IPO). The IPO, open for subscription until October 10, has already attracted significant interest with 1.51 times subscription on the first day.
The company, specializing in civil construction services, has set the IPO price band at ₹92-95 per share. A strong order book worth ₹14 billion (nine times the revenue of FY24) suggests promising business visibility. Garuda Construction has successfully completed notable projects like the Delhi Police HQ and Golden Chariot Hotel in Mumbai, showcasing its execution capabilities.
However, despite a strong order book and impressive projects, concerns about the company’s financial stability and valuation linger. While the company’s revenue and profit have witnessed significant growth, FY24 saw a slowdown, attributed to the election year. Moreover, the company’s substantial unpaid customer invoices pose a significant cash flow risk, further aggravated by the failed IPO attempt of its group company PKH Ventures in July 2023.
Experts believe the IPO’s pricing appears overstretched, hinting at unrealistic growth expectations. The company’s uneven financial track record and average performance warrant careful scrutiny before investing. While the IPO offers potential for long-term growth, investors should carefully assess the risks involved.
The proceeds from the fresh issue will be utilized to fulfill working capital requirements and general corporate purposes, including potential acquisitions. Despite initial enthusiasm, the IPO’s future success hinges on the company’s ability to navigate market volatility and deliver sustained financial performance. Investors are urged to consult with financial advisors before making any investment decisions.
First Piper 