IRM Energy IPO: Empowering Growth in Gas Distribution

Introduction:

IRM Energy IPO has marked its presence in the financial arena, orchestrating a book-built issue of Rs 545.40 crores, entirely through a fresh issue of 1.08 crore shares. Commencing on October 18, 2023, and concluding on October 20, 2023, the IPO generated substantial interest. The allotment was finalized on Friday, October 27, 2023, followed by the listing on BSE and NSE on October 26, 2023.

Pricing and Investment Dynamics:

The IPO was priced between ₹480 to ₹505 per share, with a minimum lot size of 29 shares. Retail investors had a minimum investment requirement of ₹14,645. The minimum lot size for sNII was 14 lots (406 shares), totaling ₹205,030, and for bNII, it was 69 lots (2,001 shares), amounting to ₹1,010,505.

Market Performance Snapshot:

As of December 20, 2023, IRM Energy Limited (IEL) was trading at ₹467.55, reflecting a -3.99% change. The stock opened at ₹490.60, with a high and low of ₹490.60 and ₹462.00, respectively. The previous close stood at ₹487.00, with a total traded value of 3,72,007 shares. The 52-week high and low were ₹495.95 (Oct 27, 2023) and ₹441.05 (Nov 16, 2023), respectively.

Key IPO Highlights:

• - IPO duration: October 18, 2023, to October 20, 2023
• - Listing Date: October 26, 2023
• - Face Value: ₹10 per share
• - Price Band: ₹480 to ₹505 per share
• - Lot Size: 29 Shares
• - Total Issue Size: 10,800,000 shares, aggregating up to ₹545.40 Cr
• - Fresh Issue: 10,800,000 shares, aggregating up to ₹545.40 Cr
• - Issue Type: Book Built Issue IPO
• - Employee Discount: Rs 48 per share
• - Listing At: BSE, NSE

Equity Transition:

Prior to the IPO, IRM Energy had 30,259,677 shares in circulation. Post the IPO, this figure increased to 41,059,677 shares, indicating a significant shift in market dynamics.

IPO Reservation Dynamics:

The IPO included a reservation of up to 216,000 shares for employees, offered at a discount of Rs 48 to the issue price. The allocation strategy was diversified among various investor categories:

• - QIB: 2,116,800 shares (19.60%)
• - NII: 1,587,600 shares (14.70%)
• - bNII (bids above ₹10L): 1,058,400 shares (9.80%)
• - sNII (bids below ₹10L): 529,200 shares (4.90%)
• - Retail: 3,704,400 shares (34.30%)
• - Employees: 216,000 shares (2.00%)
• - Anchor Investors: 3,175,200 shares (29.40%)

Anchor Investors and Lock-In Period:

IRM Energy IPO raised Rs 160.35 crore from anchor investors on October 17, 2023. The anchor lock-in period for 50% of shares concludes on December 12, 2023, and for the remaining shares, it ends on March 6, 2024.

IPO Timeline Highlights:

• - IPO Open Date: Wednesday, October 18, 2023
• - IPO Close Date: Friday, October 20, 2023
• - Basis of Allotment: Friday, October 27, 2023
• - Initiation of Refunds: Friday, October 27, 2023
• - Credit of Shares to Demat: Monday, October 30, 2023
• - Listing Date: Thursday, October 26, 2023
• - Cut-off time for UPI mandate confirmation: 5 PM on October 20, 2023

Promoter Holdings:

The promoters of IRM Energy Limited are Dr. Rajiv Indravadan Modi, Cadila Pharmaceuticals Limited, and IRM Trust. Pre-issue, they held 67.94% of shares.

Company Profile:

Incorporated in 2015, IRM Energy Limited operates as a gas distribution company, developing, operating, and expanding local natural gas distribution networks. It caters to industrial, commercial, domestic, and automobile customers, with a notable presence in Gujarat, Punjab, and Daman & Diu. The company serves 48,172 domestic clients, 179 industrial units, and 248 commercial clients. Recognized with the City Gas Distribution- Growing Company of the Year 2020 award, IRM Energy operates 216 CNG gas stations as of September 2022.

Financial Performance Overview:

As of June 30, 2023, IRM Energy reported noteworthy financials:

• - Assets: ₹838.21 Crores
• - Revenue: ₹248.63 Crores
• - Profit After Tax: ₹26.91 Crores
• - Net Worth: ₹373.33 Crores
• - Reserves and Surplus: ₹193.30 Crores
• - Total Borrowings: ₹321.24 Crores

Key Performance Indicators:

• - P/E (x): 24.13
• - Post P/E (x): 32.8
• - Market Cap: ₹2073.51 Crores
• - ROE: 18.23%
• - ROCE: 14.19%
• - Debt/Equity: 0.93
• - EPS (Rs): 20.93
• - RoNW: 18.23%

Objects of the Issue:

The Net Proceeds from the Issue are proposed to be utilized for:
1. Funding capital expenditure requirements for the development of the City Gas Distribution network in the Geographical Areas of Namakkal and Tiruchirappalli (Tamil Nadu) in Fiscal 2024, Fiscal 2025, and Fiscal 2026.
2. Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the Company.
3. General corporate purposes.

Expert Analysis:

The issue, based on annualized FY24 numbers, appears fully priced, making it suitable for medium to long-term investors.

IPO Subscription Status:

As of October 20, 2023, the IRM Energy IPO is subscribed 27.05 times. The subscription details include 9.29 times in the retail category, 44.73 times in the QIB category, and 48.34 times in the NII category.

Note: All financial figures are in INR (Indian Rupees), and market-related data is as of December 20, 2023.

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