IRM Energy’s initial public offering (IPO) witnessed strong interest from non-institutional and retail investors, with the subscription rate reaching 75% by the end of the first day. The IPO, which will conclude on October 20, saw retail investors subscribing 85% of the offering, while the non-institutional investor (NII) portion was subscribed 1.5 times. However, no bids were received from qualified institutional buyers (QIBs).
Before the IPO opened to the public, the company successfully raised ₹160.35 crore from anchor investors such as Quant MF, SBI General Insurance, HDFC Life, DSP MF, BOI MF, Nippon AIF, and PNB Metlife.
The subscription details for the various investor categories are as follows:
– Qualified Institutional Buyers (QIBs): 0 times subscribed
– Non-Institutional Investors (NIIs): 1.57 times subscribed
– Retail Individual Investors (RIIs): 0.85 times subscribed
– Total: 0.75 times subscribed
IRM Energy aims to raise up to ₹545.4 crore at the upper end of the price band, which has been set at ₹480-505 per equity share. Investors can bid for a minimum of 29 equity shares and in multiples of 29 thereafter. The IPO consists of an entirely fresh issue with no offer for sale portion.
The company plans to utilize the net proceeds to fund capital expenditures (capex), loan payments, and general corporate purposes. Its revenue in FY23 almost doubled to ₹1,039 crore compared to the previous year, with a net profit increase of 35% to ₹26.9 crore. Notable peers in the industry include Gujarat Gas, Indraprastha Gas, Mahanagar Gas, and Adani Total Gas.
Potential risks highlighted in the Draft Red Herring Prospectus (DRHP) include the company’s reliance on third parties for gas sourcing and transportation, the hazardous nature of the business, and the numerous licenses required for operations.
According to Prashanth Tapse, Senior VP of Research at Mehta Equities, IRM Energy’s IPO provides an opportunity to invest in a growing player in the city gas distribution segment, supported by Cadila Pharmaceuticals. Tapse recommends long-term subscription due to the company’s exclusive CNG and PNG rights, expansion plans, operational efficiency, vertical integration into renewables, and strategic investments.
However, Choice Broking cautioned that the IPO’s price-to-earnings multiple at the higher end of the price band is at a premium compared to its adjusted peers. It considers the issue to be fully priced considering the subdued profitability and return ratios, giving it a “subscribe with caution” rating.
Grey market expectations suggest a potential listing gain of 15% for the stock.
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