IRM Energy makes weak debut, lists at 5% discount against issue price

Shares of IRM Energy listed at Rs 477, a 5 per cent discount against its issue price of Rs 505 per share on the National Stock Exchange

IRM Energy made a weak stock market debut on Thursday, with its shares getting listed at Rs 477, a 5.5 per cent discount against its issue price of Rs 505 per share on the National Stock Exchange (NSE). The stock of the city gas distribution company opened at Rs 479 on the BSE.

Post listing, the stock slid further to hit an intraday low of Rs 465 on the NSE and BSE. At 10:04 AM, IRM Energy was quoting at Rs 468, 7 per cent lower against its issue price. A combined around 1.4 million equity shares had changed hands on the NSE and BSE. In comparison, the Nifty 50 was down 0.95 per cent at 18,941.
 

"IRM Energy is a relatively new company, but it has a diversified customer portfolio, distribution network, and strong customer relationships. Additionally, the company is well-positioned to benefit from the growing demand for natural gas in India. The current market condition could be a reason behind such a poor listing. However, the current market sentiment is not favorable for its listing, so investors may keep the stop loss at Rs 455 and exit if the stock breaks this level," said Shivani Nyati, Head of Wealth, Swastika Investmart.

The Rs 545-crore initial public offering (IPO) of IRM Energy had received a good response from investors with the issye getting oversubscribed by 27 times. The category for non-institutional investors was subscribed 48.34 times, while the portion for Qualified Institutional Buyers (QIBs) received 44.73 times subscription and Retail Individual Investors (RIIs) quota got subscribed 9.29 times.

IRM Energy provides piped natural gas and compressed natural gas. It has operations in many states, including Gujarat, Punjab, and Tamil Nadu.

Proceeds from the issue to the tune of Rs 307.26 crore will be used to fund capital expenditure requirements for the development of the city gas distribution network at Namakkal and Tiruchirappalli in Tamil Nadu and Rs 135 crore for payment of debt.

While IRM Energy is still an early-stage company, it has a diversified customer portfolio, distribution network, and strong customer relationships. The company has delivered revenue growth at 88 per cent CAGR between FY20-23 with 63 per cent volume growth and other listed industry players have delivered volume growth of an average rate of ~3-4 per cent in FY20-23.

Analysts at Nirmal Bang Securities are positive on company’s multifold growth compared to other players, as it is aiming to grow its volume by 3x over the next four years such as from 0.54 MMSCMD in FY23 to 1.51 MMSCMD in FY27E, on account of various opportunities available to drive the demand at its existing Geographical Areas (GAs).

Their successful track record of the company in building and operating distribution systems and their diverse customer portfolio are strong points. Additionally, the company's strong parentage and experienced leadership, along with their emphasis on technology adoption, bolster their growth potential. Furthermore, their strategic acquisition of GAs with connectivity to gas pipelines and a consistent financial performance offer a stable foundation for expansion, analysts at Anand Rathi Shares and Stock Brokers said.