IRM Energy, a city gas distribution company, has witnessed strong interest from non-institutional and retail investors in its initial public offering (IPO). At the end of the first day, the IPO was subscribed 75%, with the retail investor portion being subscribed 85%. However, no bids were received from qualified institutional buyers (QIBs).
Before the IPO was opened to the public, IRM Energy successfully raised ₹160.35 crore from anchor investors such as Quant MF, SBI General Insurance, HDFC Life, DSP MF, BOI MF, Nippon AIF, and PNB Metlife.
The table below shows the subscription status of different investor categories:
– 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
This IPO, with a price band of ₹480-505 per equity share, aims to raise up to ₹545.4 crore. The company plans to use the net proceeds for capital expenditure, loan payments, and general corporate purposes.
IRM Energy operates in the business of laying, building, operating, and expanding city or local natural gas distribution networks. In FY23, its revenues almost doubled to ₹1,039 crore, while its net profit increased 35% to ₹26.9 crore. Notable peers in the industry include Gujarat Gas, Indraprastha Gas, Mahanagar Gas, and Adani Total Gas.
However, the company faces certain risks, including dependence on third parties for gas sourcing and transportation, the hazardous nature of the business, and the complexity of obtaining licenses.
Prashanth Tapse, Senior VP of Research at Mehta Equities, recommends long-term investment in IRM Energy IPO, citing its exclusive CNG and PNG rights, expansion plans, and diverse customer base as factors that drive operational efficiency. On the other hand, Choice Broking cautions that the IPO may be fully priced considering its subdued profitability and return ratios.
The grey market is expecting approximately 15% listing gains from IRM Energy’s stock. Investors have until October 20 to subscribe to the IPO.
Source: BSE