Garuda Construction and Engineering Limited IPO: Check IPO Date, Lot Size, Price & Details

Introduction:

Garuda Construction and Engineering Limited offers comprehensive civil construction services for a wide range of projects, including residential, commercial, mixed-use residential-commercial, infrastructure, industrial, and hospitality developments. Their full-service construction approach covers everything from initial route surveys, design, and detailed engineering to resource mobilization, precise construction scheduling, securing permits, conducting soil and water tests, contractor and manpower hiring, material procurement, lab testing, and executing construction as per the approved plans.

Additionally, the company provides operations and maintenance (O&M) services, as well as Mechanical, Electrical, and Plumbing (MEP) services, along with finishing works. In essence, Garuda Construction delivers a complete, end-to-end construction solution under its brand.

IPO Details:

Objectives of Issue:

• Working Capital Requirements.

• General Corporate Purposes and unidentified inorganic acquisitions

Key Strengths:

• Expanding into Development Segment- The company is actively expanding its footprint in the civil construction sector by entering the realm of property development. Leveraging its extensive experience and expertise in construction, the company is well-positioned to succeed in this new area. Its strong reputation further enhances its ability to develop and market both residential and commercial projects. Currently, the company’s order book features two projects that encompass both construction and development—one residential and one commercial—where it is engaged as a developer or joint developer.

• Asset Light Company-Over the years, the company have acquired a range of construction equipment to ensure the timely delivery and high quality of its projects. However, to align with our goal of operating as an asset-light company, much of its construction equipment is sourced through third-party vendors. This approach helps it to maintain a lean asset structure, giving it better control over costs and minimizing disruptions caused by equipment breakdowns or unavailability.

 Risks:

• Concentrated Customer Mix – The company's top five customers account for over 80% of its total revenue, while the top ten customers collectively contribute 100% of the revenue. Within this revenue mix, related party transactions made up 43% of last year's revenue, compared to over 80% in the prior two years. As a result, the loss of any key customer could significantly impact the company’s business operations.

• Over Dependence on Related Party – The revenue breakdown shows that related parties contributed 100.00%, 44.82%, 94.62%, and 86.65% for the periods ending April 30, 2024, March 31, 2024, March 31, 2023, and March 31, 2022, respectively. While our order book includes significant contracts with third-party entities and construction projects, the company still has limited exposure to work orders or EPC contracts outside of the Promoter Group entities and affiliated companies.

• Concentrated Geographical Mix-As of the date of filling of this Red Herring Prospectus nine (9) of its contracts out of a total of twelve (12) contracts were located within the MMR. As a result, its business, financial condition and results of operations have been and will continue to be significantly if not entirely, dependent on the performance of, and the prevailing conditions affecting, the real estate market in the MMR. Any disruption in this area could significantly affect the business operations.

Financial Snapshot:

Interest Coverage Ratio – Interest Coverage Ratio determines the ability of a company to fulfill its interest obligations. It is a ratio that compares company earnings (before interest and taxes) to interest expenses. Essentially, it shows how many times a company can pay its interest charges using its operating profit. A higher ICR suggests a company is in a good financial position to handle its debt, while a lower ICR could signal potential financial difficulties.

Debt to Equity Ratio - The debt-to-equity (D/E) ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. It is a measure of the degree to which a company is financing its operations with debt rather than its own resources.

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