Garuda Construction and Engineering shares list at 10.5% premium at Rs 105

Garuda Construction and Engineering IPO listing: The company's market debut has exceeded expectations, particularly given the flat to negative outlook in the grey market before the listing.

In Short

• Shares debut at 10.5% premium, exceeding market expectations
• Analysts credit strong order book, project diversification for gains
• Investors advised caution, suggested stop loss around issue price

Garuda Construction and Engineering Limited (GCEL) made a decent debut on the stock market on Tuesday, listing at Rs 105 per share, marking a 10.5% premium over its issue price of Rs 95.

The company's market debut exceeded expectations, particularly given the flat to negative outlook in the grey market before the listing. The grey market, an unofficial trading space, had shown no premium for the shares leading up to the debut.

GCEL’s Rs 264-crore IPO saw strong demand, with the issue being subscribed 7.55 times by the final bidding day on October 10. Retail and non-institutional investors led the charge, with their respective portions being oversubscribed 10.81 times and 9.03 times, while qualified institutional buyers bid 1.24 times the quota.

Prior to the IPO launch, the company had raised Rs 75 crore through its anchor book on October 7.

The public issue included fresh equity worth Rs 173.85 crore and an offer-for-sale of 95 lakh shares by promoter PKH Ventures, valued at Rs 90.25 crore.

GCEL, which offers a broad range of construction services across residential, commercial, industrial, and infrastructure sectors, plans to use the IPO proceeds to meet its working capital needs, corporate expenses, and potential acquisitions.

Analysts attributed the strong listing to GCEL’s diversified project portfolio, solid order book, and superior return on net worth, even though the company’s growth slowed in FY24 due to the election year.

According to Shivani Nyati, Head of Wealth at Swastika Investmart Ltd, investors are likely to see modest gains from the IPO, but should remain cautious and keep a stop loss around the issue price to safeguard against market volatility.

“This positive performance 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,” Nyati said.

“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,” she added.