IRM Energy IPO subscribed 75% on day 1 with good retail interest

• Non-institutional and retail investors showed good interest in the public issue.
• The company raised ₹160.35 crore from anchor investors like Quant MF, SBI General Insurance and more.
• It plans to use net proceeds to fund capex, loan payments and general corporate purposes.
  

The initial public offer (IPO) of city gas distribution company IRM Energy was subscribed 75% by the end of the first day of the offer. The IPO will close on October 20.

Retail investors showed good interest in the IPO as this portion was subscribed 85%. While the non-institutional investor (NII) portion was subscribed 1.5 times, no bids were received from qualified institutional buyers (QIBs).

The company raised as much as ₹160.35 crore from anchor investors like Quant MF, SBI General Insurance, HDFC Life, DSP MF, BOI MF, Nippon AIF and PNB Metlife before it was opened to the public.

Source: BSE

About the issue

IRM Energy is a city gas distribution company, engaged in the business of laying, building, operating and expanding the city or local natural gas distribution network. It aims to raise as much as ₹545.4 crore at the upper end of the price band.

It has fixed a price band of ₹480-505 per equity share. Investors can bid for a minimum of 29 equity shares and in multiples of 29 equity shares thereafter.

The issue is an entirely fresh issue with no offer for sale portion. It intends to use the net proceeds to fund capex to develop the city gas network in Namakkal and Tiruchirappalli, loan payments and general corporate purposes.

In FY23, the company’s revenues almost doubled to ₹1,039 crore as compared to the year before. Its net profit went up 35 percent to ₹26.9 crore. Some of its listed peers include Gujarat Gas, Indraprastha Gas, Mahanagar Gas and Adani Total Gas.

Its dependence on third parties to source and transport gas, the hazardous nature of the business and the many licences involved in the business have been quoted as risk factors in the DRHP.

“IRM Energy IPO offers investors an opportunity to invest in a growing and emerging player in the city gas distribution segment., backed by Cadila Pharmaceuticals. Exclusive CNG and PNG rights, expansion plans, and a diverse customer base drive operational efficiency. IRMEL's vertical integration into renewables and strategic investments show foresight,” said Prashanth Tapse, senior VP of research at Mehta Equities who recommends investors to subscribe it for the long-term.

However, Choice Broking said that at the higher end of its price band, its price to earnings multiple is at a premium to its adjusted peer average. “The issue seems to be fully priced considering its subdued profitability and return ratios. We assign a ‘subscribe with caution’ rating for the issue, it added.

The grey market is expecting 15% listing gains from the stock.