IGI Logo

Incorporated in 2015, IRM Energy Ltd is committed towards contributing to the energy need of its consumers. The company has experience of more than 6 years in developing robust city gas distribution networks and connecting different customer segments in its existing Geographical Areas. It has a strong parentage of Cadila Healthcare Ltd which holds 49.5% stake in the company

Objects and Details of the Issue:

* Total issue of ~Rs. 545 Cr (at upper price band) consists of fresh issue only

* To utilise ~Rs. 307 Cr from the net proceeds to fund CAPEX requirements for development of the City Gas Distribution network and ~Rs. 135 Cr for the Prepayment or repayment of all or a portion of certain outstanding borrowings 

Investment Rationale: 

* Expanding presence in existing and newer GAs through an improved distribution channel ? Successful development and operation of CGD business

* Technology adoption to increase operational efficiency and enhance customer value

* Continue to focus on sourcing reliable and cost-effective gas from leading Gas Suppliers

* Business integration for transition into a complete energy solution provider

* Strong parentage, experienced board and management team and strong execution team

Valuation and Recommendation:-

IRM Energy Ltd has commenced its operations in 2015 and has delivered a strong performance throughout its journey. Company has delivered revenue growth at 88% CAGR between FY20-23 with 63% volume growth and other listed industry players have delivered volume growth of an average rate of ~3-4% in FY20-23. We 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 GAs. The issue is valued at 19.3x PE based on its annualized Q1FY24 EPS which is at a reasonable valuation compared to average PE Valuation of 18.6x for listed peers. Thus, we recommend SUBSCRIBE to the issue considering its robust future growth.

Company Background

IRM Energy is a city gas distribution company engaged in the business of supplying, laying, building, operating and expanding the city lying or local natural gas distribution network. They develop natural gas distribution projects in the geographical areas allotted to them for industrial, commercial, domestic and automobile customers. In Jul’16, the company received authorization to lay, build, operate, and expand the city or local natural gas network in Banaskantha and Fatehgarh Sahib, followed by Diu and Gir Somnath in Sept’18 and Namakkal and Tiruchirappalli in Jan’22.

Above views are of the author and not of the website kindly read disclaimer