Garuda Construction and Engineering Limited (GCEL) made a notable entrance into the stock market on Tuesday, with shares debuting at Rs 105 each, representing a 10.5% premium over its initial issue price of Rs 95. This market debut surpassed expectations, especially considering the flat to negative outlook observed in the grey market leading up to the listing. In fact, the grey market—an unofficial trading platform—had indicated no premium for the shares prior to their debut, making the positive performance even more surprising.
The company’s initial public offering (IPO), which raised Rs 264 crore, attracted considerable interest from investors, being subscribed a remarkable 7.55 times by the final bidding day on October 10. This strong demand was largely driven by retail and non-institutional investors, whose respective portions were oversubscribed 10.81 times and 9.03 times. Qualified institutional buyers also participated actively, bidding 1.24 times the allotted quota. Prior to launching the IPO, GCEL secured Rs 75 crore through its anchor book on October 7, demonstrating early investor confidence.
The public issue included fresh equity worth Rs 173.85 crore and an offer-for-sale component of 95 lakh shares from promoter PKH Ventures, which was valued at approximately Rs 90.25 crore. The proceeds from the IPO are earmarked for addressing working capital requirements, corporate expenses, and potential acquisitions, supporting the company’s strategic growth initiatives.
Analysts attributed the strong listing performance to several factors, including GCEL’s diversified project portfolio, robust order book, and superior return on net worth. Despite facing a slowdown in growth during FY24, attributed to the cyclical nature of the infrastructure industry and the political climate of an election year, the company’s overall fundamentals have resonated positively with investors.
Shivani Nyati, Head of Wealth at Swastika Investmart Ltd, noted that while investors may experience modest gains from this IPO, it is crucial to exercise caution in the current market environment. She recommended maintaining a stop loss around the issue price to mitigate potential risks associated with market volatility.
"This positive performance is a pleasant surprise given the pre-listing expectations of a flat or even negative opening, which were influenced by a modest grey market premium and the cyclical nature of the infrastructure industry,” Nyati remarked. She emphasized the importance of continued monitoring of the company's performance and broader market conditions, advising investors holding shares to be vigilant and responsive to any changes in the market dynamics.
Overall, the successful debut of GCEL illustrates the potential for investor interest in the construction and engineering sectors, particularly as the company aims to leverage its diversified offerings and solid market position to drive future growth in a competitive landscape.
