Ten major dangers that IRM Energy investors should be aware of before investing

 Ten major dangers that IRM Energy investors should be aware of before investing

IRM Energy IPO: Today, October 20, the subscription period for the initial public offering (IPO) of IRM Energy Ltd, the city gas distribution firm, expires. The IRM Energy IPO, which raised $545.40 billion, began on October 18; the allotment is anticipated to be completed on Friday, October 27, 2023. 

There is no offer for sale (OFS) component to the 1.08 crore equity shares that make up the IRM Energy IPO. The pricing range for the IPO has been set at between 480 and 505 rupees per equity share.

Within the specified geographic regions, IRM Energy builds natural gas distribution projects for consumers in the residential, commercial, industrial, and automobile sectors.

Dr. Rajiv Indravadan Modi, IRM Trust, and Cadila Pharmaceuticals Limited are the company's promoters.

In its Red-Herring Prospectus (RHP), the corporation cited the following significant risks:

IRM Energy's IPO: Key Risks - IRM Energy relies on outside sources for the procurement and delivery of its natural gas. It acquired 100% of the entire amount of natural gas from seven providers as of June 30, 2023, accounting for all of its purchases. Any interruption in the delivery of this natural gas by these third parties, or failure or postponement in the timely transportation of the natural gas, could result in an inconvenience or failure in the supply of natural gas by it, which could negatively impact its operations, results, and financial condition.

According to the Company's Materiality Policy, its promoters are parties to two criminal litigations, 29 regulatory proceedings, and 12 major tax litigations. The commercial operations and reputation of the firm and its promoter may be harmed in the case of any unfavorable decision.

- During their tenure, the shares of a listed company, Diamond Power Infrastructure Limited, whose shares were suspended from trading on the BSE Limited and the National Stock Exchange, also referred of India Limited, have two of the company's executives, Maheswar Sahu and Rabindra Nath Nayak, on the board of directors. With effect from September 15, 2023, the suspension order has been removed. 

Furthermore, Casil Health Products Limited, a listed firm whose shares were voluntarily delisted from the BSE Limited, had Dr. Rajiv Indravadan Modi serving on the board of directors.

- For the three months ended June 30, 2023, the Company's CNG and industrial PNG supply businesses accounted for 49.43% and 46.86% of its total operations, respectively. Due to their reliance on CNG and industrial PNG supply activities, any decline in sales might have a negative impact on the business, operation, financial situation, and cash flows of the firm. 

The organization needs a number of licenses and permissions to operate, and failing to secure or maintain them in a timely way, or at all, might negatively impact its operations. 

- Any network infrastructure failure that affects how the business gets and distributes natural gas presents a serious danger to its operations.

- Delays in the building and commissioning of the company's new and existing gas distribution pipes might put its MWP objectives at danger, among other things.

- IRM Energy depends on government regulations for the distribution of natural gas and the price at which gas is delivered to its home PNG and CNG clients. Any decrease in the amount of natural gas allocated or any rise in the price of gas might have a negative impact on their operations, cash flow, company, and reputation.

- The operation of CNG filling stations for the Company's CNG business is reliant on OMCs and third-party dealers. A danger exists in any dispute with such OMCs or outside dealers.

- IRM Energy also faces risks from its competitors, including the possibility of post-marketing exclusivity competition from a number of current firms in the same sector.

IPO Review of IRM Energy

Despite the aforementioned major concerns, the majority of brokerages have given the IRM IPO a "Subscribe" recommendation because to the company's long-term development possibilities.

"The firm is valued at the top price range on post-issue capital at an FY23 PE multiple of 32.8x and an EV/EBITDA of 20.3x. A CAGR of 19–20% is predicted for natural gas demand in the CGD sector between FY23 and FY27P, which seems to be quite positive for the company's growth prospects. For the sake of long-term growth, we advise investors to subscribe to the issue, according to SBI Securities.

Today's IRM Energy IPO GMP

IRM Energy Limited's IPO GMP, or grey market premium, has decreased and is now just 45 cents per share. This shows that, according to market watchers, IRM Energy shares were selling at a 45 percent premium on Friday on the gray market.

The expected listing price of IRM Energy shares was stated at 550 per share, which is 8.91% more expensive than the IPO price of 505, when taking into account the top end of the IPO pricing range and the existing premium on the grey market.