IRM Energy lists at Rs 477, over 5% discount to IPO price

IRM Energy is in the business of city gas distribution (CGD). The company’s revenue derives from selling both compressed natural gas (CNG) and piped natural gas (PNG) in the allotted geographical areas (GAs).

Cadila Pharmaceuticals-backed IRM Energy made a lacklustre debut on the bourses, pulled down by selloff in broader markets. The stock started trading at Rs 477.25 on the NSE and Rs 479 on the BSE, lower by 5.5 percent compared to issue price of Rs 505.

Analysts had expected the stock to list at 8-10 percent premium, however market selloff played spoilsport.

The Gujarat-based city gas distribution company's IPO was subscribed 27.05 times. Retail subscribers subscribed 9.29 times, while non-institutional investors subscribed 48.34 times, and qualified institutional buyers subscribed 44.73 times.

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IRM Energy is in the business of city gas distribution (CGD). The company’s revenue derives from selling both compressed natural gas (CNG) and piped natural gas (PNG) in the allotted geographical areas (GAs).

While brokerages said that IRM Energy was fairly priced, falling margins in FY23 was a major concern.

The profit margin came down to 5.4 percent in FY23 from 20.8 percent in FY22 while the EBITDA margin dropped to 10 percent from 31 percent in the same period.

Also Read: IRM Energy: A deep dive into its business, how it earns money, and whether you should invest

As per IRM Energy, the fall in margins and rise in debt in FY23 were due to the low allocation of APM and higher non-APM gas prices, owing to the global headwinds and as the company was in the transition phase for enrolling industries in Fatehgarh Sahib, it did not pass on the entire increase in the gas cost to customers to boost conversions and volumes.

Shivani Nyati, Head of Wealth, Swastika Investmart, believes that IRM Energy is still in the early stages of growth and may be impacted by unforeseen factors and other risks like limited geographic reach, government policies, delayed revenue generation, etc.

The booming electric vehicle (EV) market also poses a risk as the transition towards clean and renewable energy and a shift in the market sentiment towards EVs could result in a decline in the usage of natural gas by IRM Energy’s customers.

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