IRM Energy IPO is completely a fresh issue of 1.08 crore equity shares and there is no offer for sale (OFS) component. The IPO price band has been fixed in the range of ₹480 to ₹505 per equity share.
IRM Energy develops natural gas distribution projects for residential, commercial, industrial and automotive users within the designated geographic areas.
The company’s promoters are Cadila Pharmaceuticals Limited, Dr. Rajiv Indravadan Modi, and IRM Trust.
Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):
IRM Energy IPO: Key Risks
– IRM Energy is dependent on third parties for sourcing and transportation of natural gas. As of June 30, 2023, it procured natural gas from seven suppliers which constituted 100% of its total quantity purchased. Any disruption in the receipt of such natural gas from these third parties, or delay or default in timely transportation of the natural gas could lead to a disruption or failure in the supply of natural gas by it, which could adversely affect its business, reputation, results of operations and cash flows.
– There are two criminal litigations, 29 regulatory actions and 12 material tax litigations as per the Company’s Materiality Policy, involving their promoters. In the event of any adverse outcome, the company’s and their promoter’s business operations and reputation may be affected.
Also Read: IRM Energy IPO Day 3: Check GMP, subscription status, should you subscribe?
– Two of the company’s Directors, namely Maheswar Sahu and Rabindra Nath Nayak, are on the board of directors of a listed company, Diamond Power Infrastructure Limited, whose shares have been suspended from being traded on the BSE Limited and the National Stock Exchange of India Limited, during their tenure. The suspension order has been revoked effective from September 15, 2023.
Further, its Director, Dr. Rajiv Indravadan Modi, has been on the board of directors of a listed company, Casil Health Products Limited, whose shares were voluntarily delisted from the BSE Limited.
– The Company’s CNG and industrial PNG supply operations account for 49.43% and 46.86% of their total operations (in terms of volume) for the three months ended June 30, 2023. They are heavily reliant on their CNG and industrial PNG supply operations and any decrease in the sales, may have an adverse effect on the business, operation, financial condition and cash flows of the company.
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– The company requires various licenses and approvals for undertaking their businesses and the failure to obtain or retain such licenses or approvals in a timely manner, or at all, may adversely affect their operations.
– Any breakdown in the network infrastructure through which the company sources and supplies natural gas poses a severe risk to its operations.
– The company may be subject to risks associated with delays in construction and commissioning of its existing and new gas distribution pipelines, including any delay in meeting its MWP targets.
– IRM Energy is dependent on Government policies for allocation of natural gas and cost of gas supplied for their CNG and domestic PNG customers. Any reduction in allocation of natural gas or any increase in the cost of gas could adversely affect their business, reputation, operations and cash flows.
– The Company’s CNG business is dependent on OMCs and third-party dealers for the operation of CNG filling stations. Any conflict with such OMCs or third-party dealers poses a risk.
– IRM Energy also faces competitive risks as it may face competition post marketing exclusivity from various existing players which operate in the same industry.
Also Read: IRM Energy IPO: Firm mobilises ₹160 crore from anchor investors ahead of issue
IRM Energy IPO Review
Despite above key risks, most brokerages have issues “Subscribe” rating to IRM IPO given the company’s long term growth prospects.
“The company is valued at FY23 PE multiple of 32.8x and EV/EBITDA of 20.3x, at the upper price band on post-issue capital. Demand for natural gas in the CGD sector is expected to grow at a CAGR of 19-20% over FY23-FY27P which seems very supportive for the company’s growth outlook. We recommend investors to subscribe to the issue for long-term growth perspective,” said SBI Securities.
IRM Energy IPO GMP today
IRM Energy Limited IPO GMP today, or grey market premium today, has dropped to ₹45 per share. This indicates IRM Energy shares were trading at a premium of ₹45 in the grey market on Friday, as per market observers.
Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of IRM Energy share price was indicated at ₹550 apiece, which is 8.91% higher than the IPO price of ₹505.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 20 Oct 2023, 12:35 PM IST