The IRM Energy IPO, amounting to Rs 545.40 crores, is a book-built issue comprising entirely of fresh shares totaling 1.08 crore. Bidding for the IPO commenced on October 18, 2023, and concluded on October 20, 2023. Allotment was finalized on Friday, October 27, 2023, and the shares were listed on both BSE and NSE on October 26, 2023.

The price band for the IRM Energy IPO was set at ₹480 to ₹505 per share. The minimum lot size for application was 29 shares, requiring a minimum investment of ₹14,645 for retail investors. Subscribers under the sNII category were required to apply for a minimum of 14 lots (406 shares), totaling ₹205,030, while those under the bNII category had to apply for at least 69 lots (2,001 shares), amounting to ₹1,010,505.

Additionally, the IPO included a reservation of up to 216,000 shares for employees, offered at a discount of Rs 48 to the issue price. HDFC Bank Limited and BOB Capital Markets Limited served as the book running lead managers for the IRM Energy IPO, with Link Intime India Private Ltd acting as the registrar for the issue.

Objective of IPO.

1. Funding capital expenditure requirements for development of the City Gas Distribution network in the Geographical Areas of Namakkal and Tiruchirappalli (Tamil Nadu) in Fiscal 2024 (from December 1, 2023, to March 31, 2024), Fiscal 2025, Fiscal 2026 and Fiscal 2027 (from April 1, 2026 to September 30, 2026);
2. Prepayment or repayment of all or a portion of certain outstanding borrowings availed by our Company.
3. General corporate purposes

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About IRM ENERGY Limited

The company is engaged in the business of laying, building, operating, and expanding the city or local natural gas distribution network. It is a city gas distribution (“CGD”) company in India, with operations at Banaskantha (Gujarat), Fatehgarh Sahib (Punjab), Diu & Gir Somnath (Union Territory of Daman and Diu/Gujarat), and Namakkal & Tiruchirappalli  (Tamil Nadu).

The company supplies PNG & CNG to its custmers.

Compressed Natural Gas: Customers include operators of public transport vehicles such as taxis, auto-rickshaws, and private vehicles such as cars, buses, light goods vehicles, and heavy goods vehicles.

Piped Natural Gas: Customers are broadly classified into three segments, which are, industrial PNG (small, medium and large-sized enterprises), commercial PNG (such as hotels, restaurants, bakeries, hostels and community halls) and domestic PNG (predominantly using PNG as cooking gas).

Natural gas consumption in India clocked a compound annual growth rate (CAGR) of 3.8% between fiscals 2016 and 2020, rising to ~176 mmscmd in fiscal 2020. However, it dipped 5% in fiscal 2021 due to Covid-19 related challenges such as constrained transportation and industrial activities. Demand rose again ~4.8% in fiscal 2022.

Total household PNG connections are expected to surge from ~78.2 lakh as of fiscal 2021 to 190-200 lakh by fiscal 2026 due to increasing CGD penetration in newer areas and the government’s push to increase gas consumption. This number will further multiply with the CGD network covering Andhra Pradesh, Tamil Nadu, Telangana, West Bengal, etc, between fiscals 2025 and 2030. Moreover, consumption per connection should increase due to rising disposable income and economic growth. Consequently, demand from the domestic segment is projected to log a 38-39% CAGR between fiscals 2023 and 2030.

Industrial PNG demand to clock an 7-8% CAGR between fiscals 2023 and 2027, with demand stabilising at a 6-7% CAGR between fiscals 2027 and 2030. Newer geographical areas (GAs) will have a lower share in industrial demand over the long term, as the major industrial regions, such as Gujarat, Maharashtra, and Delhi, have already shifted to PNG. However, long-term demand growth from the commercial segment could remain healthy.

Risk Analysis.

1. The company is dependent on 3rd party sourcing for transportation of natural gas. 7 suppliers are responsible for 100% raw material.
2. Transporting gas from one place to another is hazardous.
3. The company has recently issued 2,75,000 shares in the recent past one year for ₹550 each.
4. The company's 96% of the top line comes from CNG and industrial PNG.
5. The company requires various licenses from the government and other approvals as well.
6. The company requires 15 to 18 months to generate revenue from its Gas.
7. 2 Directors of the company are the BOD members of listed companies which are suspended from being traded on NSE &BSE.
8. Any breakdown in the network infrastructure of the supply could affect the company.
9. The company is undergoing 2 criminal litigations, 29 regulatory actions and 12 material tax litigations as per materiality policy, involving the promoters as well.
10. The CNG business is dependent on OMCs and third-party dealers for the operation of CNG filling stations.
11. All the pre matches of the company, including the corporate office are on lease, the expansion of business is dependent on Gas. Advancement in the electric vehicle could affect the business for the company as well