IRM Energy, a city gas distribution company, has witnessed strong investor interest in its initial public offering (IPO). The IPO, which opened on October 18, was subscribed 75% by the end of the first day. The company plans to raise up to ₹545.4 crore at the upper end of the price band.
Retail investors showed significant interest in the IPO, with this portion being subscribed 85%. However, no bids were received from qualified institutional buyers (QIBs), while the non-institutional investor (NII) portion was subscribed 1.5 times.
Before the IPO was opened to the public, IRM Energy 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.
According to data from the Bombay Stock Exchange (BSE), the subscription details for the IPO are as follows:
– 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’s IPO is an entirely fresh issue with no offer for sale portion. The net proceeds from the IPO will be used for capital expenditure, loan payments, and general corporate purposes. The company aims to develop the city gas network in Namakkal and Tiruchirappalli.
In the fiscal year 2022-23, IRM Energy reported a significant increase in revenues, reaching ₹1,039 crore, a growth of nearly 100% compared to the previous year. The company’s net profit also increased by 35% to ₹26.9 crore. Some of its listed peers in the industry include Gujarat Gas, Indraprastha Gas, Mahanagar Gas, and Adani Total Gas.
The company faces certain risks, including its reliance on third parties for sourcing and transporting gas, the hazardous nature of the business, and the numerous licenses involved. However, Prashanth Tapse, Senior VP of Research at Mehta Equities, recommends investors to subscribe to the IPO for the long-term, citing IRM Energy’s exclusive CNG and PNG rights, expansion plans, and diverse customer base as drivers of operational efficiency.
On the other hand, Choice Broking advises caution, noting that at the higher end of its price band, IRM Energy’s price to earnings multiple is at a premium compared to its peers. The brokerage assigns a “subscribe with caution” rating for the issue.
The grey market expects a listing gain of 15% from IRM Energy’s stock. The IPO will remain open for subscription until October 20.
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