Garuda Construction listing positive surprise for investors

Garuda Construction and Engineering made a decent debut on the exchanges on Tuesday with a 10% premium over its issue price. The listing is a pleasant surprise given the pre-listing expectations of a flat or even negative listing, fuelled by the modest grey market premium and the cyclical nature of the infrastructure industry.

Analysts said strong order book, project diversification, and superior returns on net worth contributed to the positive listing. While the company's growth slowed in FY24 due to the election year, the overall financial performance remains robust.

"Investors who participated in the IPO are likely sitting on a modest gain, but it's important to maintain a cautious approach and continue monitoring the company's performance and market conditions. Investors who are holding the position are suggested to keep a stop loss around the issue price," said Shivani Nyati, Head of Wealth, Swastika Investmart.

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The proceeds from the fresh issue, to the extent of Rs 100 crore, will be utilised for funding the working capital requirements and for general corporate purposes, including unidentified inorganic acquisitions.

Garuda Construction provides end-to-end civil construction for residential, commercial, residential cum commercial, infrastructure and industrial projects and additional services for infrastructure and also hospitality projects.

The company's key strengths include a strong order book and project diversification, which provide a stable revenue stream.

The Indian construction sector has grown at a CAGR of 10.6% from FY18 to FY23 from Rs 2.37 lakh crore to Rs 3.9 lakh crore. The sector is further expected to grow to Rs 6.49 lakh crore by FY30 at a CAGR of 7.5%.

For the year ending March 2024, the company's revenue from operations fell 4% year-on-year to Rs 151 crore and the profit after tax also declined to Rs 36.43 crore from Rs 40.79 crore a year ago.

Corpwis Advisors acted as the sole book-running lead manager for the IPO, and Link Intime India was the registrar of the offer.

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