I exited the stock due to lack of conviction over two things - company’s huge business coming from group companies and high operating margin of approx 30% which I have not seen in any company working in similar segment.
Valid points. These were the exact two “elephants in the room” during the IPO analysis as well, and they remain the primary risks for the thesis.
Just to play devil’s advocate (or offer the “Bull” counter-narrative) for those still tracking it:
- The “Artificial” Margins vs. Asset-Light Model
The 30% OPM is definitely an outlier for a pure-play EPC contractor (where 12-15% is the gold standard). The management’s defense is their asset-light model. Unlike typical EPC players (like NCC or L&T) who own heavy machinery and have high depreciation/interest costs, Garuda outsources almost all execution (labor, materials, equipment) to subcontractors.
- The Bull View: They are essentially acting as a high-level project manager rather than a builder, stripping out the capital-heavy costs.
- The Bear View (Your point): Sustaining 30% margins by simply “managing” subcontractors is historically unheard of. It often signals that the “subcontractors” might be squeezing costs unnaturally, or the pricing from the Group Companies (who give them the contracts) is inflated to book profits in the listed entity.
- The Group Company Overhang
The RHP data was stark here—revenue concentration from promoter entities was as high as 100% in stub periods and ~45% in FY24.
- The Pivot: The only investible trigger here is if the Non-Group order book actually grows. They have started bidding for 3rd party private and government contracts (claiming an order book of ~₹3,400 Cr recently), but until the P&L reflects a 50:50 mix of Group vs. Non-Group revenue, the “corporate governance discount” will likely keep the PE suppressed.
3 Likes
New coo plus new order expected. JaiHo
Key Highlights From the Document
New COO Appointed — Very Strong Profile
Mr. Shanti Lal Gaggar appointed as COO (KMP).
Why this is positive:
30+ years experience
Chartered Accountant + strong infra, audit, planning background
Worked earlier in senior role at Vishwa Samudra Engineering Pvt. Ltd (major infra company)
He will help streamline operations, cost control, risk management → directly improves margins & cash flow
This is a very strong corporate governance and execution improvement move.
Aggressive Bidding Strategy
The company clearly states:
“We are bidding aggressively and expect big orders shortly.”
2 Likes
This is exactly the “on-ground” verification we needed. I dug into local Hindi newspapers (Dainik Jagran and Live Hindustan) from Gorakhpur to find what the local reporters are seeing.
Here is the Local News Round-up regarding Garuda’s Gorakhpur project site.
1. The “Breaking” News (Dec 31, 2025)
Source: Dainik Jagran (Gorakhpur Edition)1
Headline: “Elite Club to be ready in 5 months, Convention Centre by October”
- The Update: The local development authority (GDA) has officially stated that the construction is advancing so fast that they have already released a Request for Proposal (RFP) to hire a company to manage and operate the club and convention centre.
- Why this is huge: You don’t hire an “Operator” if the building is stuck in a hole. You only do this when the structure is visible and completion is in sight.
- Timeline Reveal: The news report explicitly mentions that the Elite Club part of the project is targeted for completion in 5 months (May 2026) .2 This is much faster than the market expects.
2. The “Design Change” News (Explains the Soil Tender)
Source: Live Hindustan
Topic: “Convention Center design to change, basement depth reduced”
- The Insight: Local reports confirm that GDA approved a change in design to reduce the depth of the basement due to the high water table near Ramgarh Tal (the lake).
- Connecting the Dots: Remember the “Soil Filling Tender” we found earlier? This explains why it was issued. Since they made the basement shallower, they finished the concrete work faster and immediately needed soil to backfill the empty space.
- Impact: This design change actually saved time and money, speeding up the transition to the “Super-structure” (Vertical) phase.
3. The “Quality Control” Update
Source: Local City News (July/August Archives)
Topic: “London firm to monitor quality”
- The News: To ensure this doesn’t become a typical delayed government project, GDA has appointed Ernst & Young (EY)—a global “Big 4” firm—as the Project Management Consultant (PMC).
- What this means: EY sends independent engineers to the site every week to certify the billing. If Garuda books ₹100 Cr revenue, it is likely “EY Certified,” meaning the numbers are bulletproof.
4. The “Live Event” Confirmation (Jan 11-17, 2026)
Event: Gorakhpur Mahotsav 20263
- The Context: The “Gorakhpur Mahotsav” (a massive city festival) was held just last week (Jan 11-17).4
- Location: It is held at Champa Devi Park—exactly where Garuda’s construction site is.
- The Visual Proof: Thousands of people and VIPs (including potential visits by CM Yogi Adityanath) were at the park. You cannot hide a “stalled site” during the city’s biggest festival. The fact that work is continuing (as per the “Boundary Wall” tender) during this high-profile event shows the government is pushing for speed.
Summary of Local News Checks
| Newspaper / Source | Date | Key Update | Sentiment |
|---|---|---|---|
| Dainik Jagran | Dec 31, 2025 | “Elite Club” ready in 5 months; Operator search started. | Very Bullish |
| Live Hindustan | Recent | Basement depth reduced (explains fast soil filling). | Positive (Speed) |
| GDA Official | Dec 27, 2025 | Tender for Boundary Wall & Pathways issued. | Confirmed Activity |
Analyst Verdict:
The local news is even better than the national news. While Mumbai investors are worried about “QIP pricing,” Gorakhpur locals are reading news about “Club Opening in 5 Months.”
3 Likes
Garuda Construction – Q3 FY26 Results (Dec 2025)
Standalone
Q3 FY26 (YoY vs Q3 FY25)
Revenue: ₹14,005 Cr vs ₹6,222 Cr (+125%)
EBITDA (PBT before tax): ₹4,369 Cr vs ₹1,720 Cr (+154%)
PAT: ₹3,297 Cr vs ₹1,287 Cr (+156%)
EPS: ₹3.54 vs ₹1.43
9M FY26 (YoY vs 9M FY25)
Revenue: ₹38,167 Cr vs ₹14,409 Cr (+165%)
PBT: ₹11,741 Cr vs ₹4,245 Cr (+176%)
PAT: ₹8,812 Cr vs ₹3,176 Cr (+177%)
EPS: ₹9.47 vs ₹3.98
Margins (Q3 FY26)
PBT Margin: ~31%
PAT Margin: ~23.5%
Consolidated
Q3 FY26 (YoY vs Q3 FY25)
Revenue: ₹14,002 Cr vs ₹6,222 Cr (+125%)
PBT: ₹4,367 Cr vs ₹1,720 Cr (+154%)
PAT (Post NCI): ₹3,290 Cr vs ₹1,287 Cr (+155%)
EPS: ₹3.54 vs ₹1.43
9M FY26 (YoY vs 9M FY25)
Revenue: ₹38,167 Cr vs ₹14,409 Cr (+165%)
PBT: ₹11,735 Cr vs ₹4,245 Cr (+176%)
PAT (Post NCI): ₹8,803 Cr vs ₹3,176 Cr (+177%)
EPS: ₹9.46 vs ₹3.98
Balance Sheet Snapshot
Reserves: ₹28,529 Cr
Equity Capital: ₹4,652 Cr (FV ₹5)
Key Takeaways
Strong topline acceleration (2.2x YoY in Q3).
Margins sustained at ~30%+ PBT level.
PAT growth outpacing revenue growth.
Consolidated largely mirrors standalone (subsidiary impact minimal).
Disclaimer -invested
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In the interview, MD Praveen Agarwal projected a strong outlook for Garuda Construction & Engineering.
He stated the order book is ~₹4,800–5,000 crore, giving roughly three years of execution visibility. New orders are in the pipeline, but the company is signing selectively to protect high margins.
Margins expanded to 32%, and he indicated they should be sustained or improve further due to operating leverage and better project selection.
Cost inflation in steel and cement is described as manageable.
https://youtu.be/0g5qkgEXee8?si=u5q5gf1PD-xA2Aze
Disclosure: Invested
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