IRM Energy, a city gas distribution company, saw a strong response from non-institutional and retail investors in its initial public offer (IPO). By the end of the first day, the IPO had already been subscribed 75%, with the offer set to close on October 20.
Retail investors showed significant interest in the IPO, subscribing to 85% of the available shares. The non-institutional investor portion was subscribed 1.5 times, while there were no bids from qualified institutional buyers (QIBs).
Prior to the IPO opening to the general public, IRM Energy raised a total of ₹160.35 crore from anchor investors, including Quant MF, SBI General Insurance, HDFC Life, DSP MF, BOI MF, Nippon AIF, and PNB Metlife.
According to data from the Bombay Stock Exchange (BSE), here is a breakdown of the subscription numbers:
– Qualified Institutional Buyers (QIBs): 0 times subscribed
– Non-Institutional Investors (NIIs): 1.57 times subscribed
– Retail Individual Investors (RIIs): 0.85 times subscribed
– Total: 0.75 times subscribed
IRM Energy aims to raise up to ₹545.4 crore at the upper end of the price band, which has been set at ₹480-505 per equity share. Investors can bid for a minimum of 29 equity shares and in multiples of 29 equity shares thereafter.
The IPO consists entirely of fresh issue shares, with no offer for sale portion. The net proceeds from the IPO will be utilized for various purposes, including funding capital expenditure, loan payments, and general corporate needs. The company plans to develop the city gas network in Namakkal and Tiruchirappalli.
In the fiscal year 2022-2023, IRM Energy’s revenues nearly doubled to ₹1,039 crore, and its net profit increased by 35% to ₹26.9 crore. Key competitors in the market include Gujarat Gas, Indraprastha Gas, Mahanagar Gas, and Adani Total Gas.
Potential risks associated with the business, as mentioned in the Draft Red Herring Prospectus (DRHP), include dependence on third parties for gas sourcing and transport, the hazardous nature of the business, and the need for multiple licenses.
Industry experts have shared their opinions on the IPO. Prashanth Tapse, senior VP of research at Mehta Equities, highlighted the growth potential of IRM Energy in the city gas distribution segment, stating that its exclusive CNG and PNG rights, expansion plans, and diverse customer base contribute to operational efficiency. He recommends long-term investment in the IPO.
On the other hand, Choice Broking views the IPO as fully priced given the company’s subdued profitability and return ratios. They assign a “subscribe with caution” rating for the issue.
In the grey market, there is an expectation of 15% listing gains for the stock.
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