IRM Energy Limited IPO 2023

IRM Energy Limited is a leading gas distribution company founded in 2015. Specializing in the development, operation, and expansion of local natural gas distribution networks, the company serves diverse customer segments, including industrial, commercial, domestic, and automobile clients. 

Headquartered in India, IRM Energy has established its presence in key regions, such as Banaskantha District in Gujarat, Fatehgarh Sahib in Punjab, and Diu and Gir-Somnath in the Union Territory of Daman, Diu, and Gujarat. 

Recognized for its outstanding contributions, the company received the prestigious City Gas Distribution- Growing Company of the Year award in 2020 from the Federation of Indian Petroleum Industries. 

With a strong commitment to providing reliable natural gas services, IRM Energy Limited continues to play a vital role in the energy sector.

IRM Energy Limited-Journey

The company was initially incorporated as 'IRM Energy Private Limited' under the Companies Act, 2013, and received a certificate of incorporation on December 1, 2015, from the RoC. Later, it transitioned from a private limited company to a public limited company. This change occurred following a board resolution on February 25, 2022, and a special resolution passed by the shareholders on March 8, 2022. Consequently, the company's name was modified to 'IRM Energy Limited,' and a new certificate of incorporation, dated March 23, 2022, was issued by the RoC

Natural Gas Market in India

India experienced a notable surge in natural gas consumption, with a compound annual growth rate (CAGR) of 3.8% between the fiscal years 2016 and 2020. By fiscal 2020, consumption had reached approximately 176 million metric standard cubic meters per day (MMSCMD). Looking forward, the demand for natural gas from the compressed natural gas (CNG) and piped natural gas (PNG) sectors, especially in domestic and industrial segments, is expected to witness significant growth. Anticipated between the fiscal years 2023 and 2030, the City Gas Distribution (CGD) sector is forecasted to exhibit a robust 19-20% CAGR, reaching a range of 117-120 MMSCMD. This expansion is attributed to the inclusion of new cities into the gas network. The Piped Natural Gas (PNG) segment, in particular, is set to benefit from increased penetration, emerging as a pivotal driver for the escalating demand, as highlighted in the CRISIL Report.

Key drivers for natural gas demand include:

• Home Expansion: Rising households fuel demand.

• Eco-Friendly Travel: Surging CNG vehicles to drive adoption

• Tourism Thrives: Tourist spots boost gas needs.

• Green Regulations: Supportive policies drive industrial and domestic use.

• Industrial Hubs: Clusters power industrial demand.

• Trichy Excellence: The engineering hub provides conversion opportunities, ensuring sustainable energy growth.

IRM Energy Limited IPO Details

IRM Energy's upcoming IPO, aiming to raise Rs 545.40 crores, consists entirely of fresh shares totaling 1.08 crore. The subscription window opens on October 18, 2023, and closes on October 20, 2023. Allotments are set to be finalized by October 27, 2023. The anticipated listing date on both BSE and NSE is Tuesday, October 31, 2023.

Potential investors can purchase IRM Energy shares within the price range of Rs 480 to Rs 505 per share. The minimum application size is 29 shares, requiring an investment of Rs 14,645. Seasoned individual investors (sNII) need a minimum investment of Rs 205,030 (406 shares for 14 lots), while big-ticket individual investors (bNII) must invest at least Rs 1,010,505 (2,001 shares for 69 lots).

Purpose of IRM Energy Limited IPO Issue

The intended uses for the net proceeds from the issue are outlined as follows:

• Funding Capital Expenditure: Development of the City Gas Distribution Network in Namakkal and Tiruchirappalli (Tamil Nadu) in Fiscal 2024, Fiscal 2025, Fiscal 2026, and Fiscal 2027. The amount allocated: Rs. 3,072.62 million.

• Repayment of Borrowings: Prepayment or repayment of certain outstanding borrowings obtained by thecompany. The amount allocated: Rs. 1,350.00 million.

• General Corporate Purposes: Funds earmarked for general corporate purposes The specific amount (not exceeding 25% of the net proceeds) will be determined upon the fixation of the issue price and will be updated in the prospectus before filing with the RoC.
  

IRM Energy Limited IPO Issue Key Dates:

IRM Energy Limited IPO Lot Size

IRM Energy Limited Investment Potential:

Qualitative Factors:

• Market dominance: exclusive supply rights in CNG and PNG within designated areas.

• Expert CGD Operations: Proven track record in developing and managing City gas distribution businesses

• Diverse Customer Base: Wide-ranging customers and a robust distribution network enhance market presence.

• Experienced Leadership: A strong, experienced board and management ensure effective decision-making and execution.

• Innovation Focus: Technology adoption and digital initiatives optimize operational efficiency.

• Strategic Sourcing: Connected to gas pipelines, ensuring reliable and cost-effective sourcing arrangements

• Financial Stability: Strong financial performance, growth, and profitability are supported by efficient operations and favorable regulations.

Quantitative Factors:

Key Performance Indicator

Risk Factors:

• Dependency on Third Parties: IRM Ltd. relies entirely on seven suppliers for natural gas procurement. Any disruption in supply or transportation delays could severely impact their operations, reputation, and financial stability.

• Hazards in Gas Transportation: Transporting natural gas carries inherent risks of accidents, which could damage the company's reputation and lead to financial losses.

• Promoters' Financial Obligations: Promoters are liable for loans if the company defaults, and IRMLtd. is also responsible for loans of itsassociatee companies, potentially straining their financial resources.

• Dependency on CNG and Industrial PNG Operations: Nearly half of IRM's operations are reliant on CNG and industrial PNG. Any decrease in sales in these sectors could adversely affect the company's overall financial health.

• Uncertain Funds from the Issue: IRM Ltd. may not receive sufficient funds from the issue, impacting the planned utilization of net proceeds and hindering their objectives.

• License and Approval Risks: Delays or failures in obtaining necessary licenses and approvals might disrupt their operations, leading to financial setbacks.

• Revenue Generation Delays: The company typically takes 15-18 months to generate revenue in their geographical areas. Any further delays could impact their financial projections and stability.

• Contingent Liabilities: IRM Ltd. carries contingent liabilities amounting to Rs. 2,396.85 million, which, if realized, could significantly impact their business, financial condition, and results of operations.

In conclusion, IRM Energy's forthcoming IPO represents an enticing investment prospect. Their robust market position, backed by exclusive supply rights and adept City Gas Distribution operations, underscores their industry expertise. With a diverse customer base and a focus on operational innovation, IRM Energy stands out.

Moreover, their strategic advantage in gas sourcing, bolstered by financial stability and consistent profitability, enhances investor confidence. The IPO, set to raise Rs 545.40 crores, offers shares priced between Rs 480 to Rs 505 each. The subscription period runs from October 18 to October 20, 2023.

This opportunity signifies a strategic entry point for investors seeking a stable and promising investment avenue within the energy sector.

Frequently Asked Questions

1. What is IRM Energy Limited IPO?

IRM Energy Limited IPO refers to the initial public offering of shares by IRM Energy Limited, a leading gas distribution company founded in 2015.

2. What is the Share Price for IRM Energy Limited IPO?

The IRM Energy Limited IPO share price falls within the range of Rs. 480 to Rs. 505 per share.

3. What is the IPO Date for IRM Energy Limited?

The IPO for IRM Energy Limited opens on October 18, 2023, and closes on October 20, 2023.

4. What is the Lot Size and Investment Amount for Retail Investors?

Retail investors can apply for a minimum of 1 lot (29 shares) with an investment of Rs. 14,645. The maximum is 13 lots (377 shares) amounting to Rs. 190,385.

5. What Are the Key Qualitative Factors of IRM Energy Limited?

IRM Energy Limited boasts market dominance, expert City Gas Distribution (CGD) operations, a diverse customer base, experienced leadership, innovation focus, strategic gas sourcing, and financial stability.

6. What Are the Risks Associated with IRM Energy Limited IPO?

Potential risks include dependency on third parties, hazards in gas transportation, financial obligations of promoters and associate companies, reliance on CNG and Industrial PNG operations, uncertain funds from the issue, license and approval risks, revenue generation delays, and contingent liabilities.

 

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