Cadila Pharma-backed IRM Energy Limited, is a city gas distribution ("CGD") company in India, engaged in the business of laying, building, operating and expanding the city or local natural gas distribution network has filed its Draft Red Herring Prospectus (DRHP) with the markets regulator, Securities and Exchange Board of India (SEBI), to raise funds through an initial public offering (IPO).
The public issue with a face value of Rs 10 per equity share is a complete fresh issue of shares of up to 10,100,000 equity shares by the existing shareholders. The offer also includes a reservation for a subscription by eligible employees.
The Offer is being made through the Book Building Process, wherein not more than 50% of the Offer shall be available for allocation to Qualified Institutional Buyers, not less than 15% of the Offer shall be available for allocation to Non-Institutional Bidders and not less than 35% of the Offer shall be available for allocation to Retail Individual Bidders.
The company, in consultation with the lead bankers to the issue, may consider a Pre-IPO placement for up to 2,000,000 equity shares. If such placement is completed, the issue size will be reduced accordingly.
The proceeds from the fresh issuance worth Rs 307.26 crores will be used towards funding capital expenditure requirements for development of the City Gas Distribution network in the Geographical Areas of Namakkal and Tiruchirapalli (Tamil Nadu) in Fiscal 2024, 2025 and 2026 and Rs 167.50 towards prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company.
The promoters own 67.94% of the shares of the Ahmedabad-based company, with the majority being held by Cadila Pharmaceuticals Limited (49.50%), and the remaining shares being held by IRM Trust Ltd. through its managing trustee, Dr. Rajiv Indravadan Modi.
IRM Energy Limited (IRMEL) commenced its operations in July 2017 at the Banaskantha and Fatehgarh Sahib awarded by the Petroleum and Natural Gas Regulatory Board ("PNGRB") with a focus on meeting the energy needs of customers in its geographical areas through its pipelines and CNG station network at a competitive price, while maintaining high safety standards.
According to a CRISIL report mentioned in the DRHP, the company provides PNG used by domestic households as well as commercial and industrial units, and CNG for use in motor vehicles, is also one of the safest, cleanest, and most cost-effective fuel providers for households, commercial establishments, and industrial units, as well as for fuel requirements in the transportation segment.
The company has operations at Banaskantha (Gujarat), Fatehgarh Sahib (Punjab), Diu & Gir Somnath (Union Territory of Daman and Diu/Gujarat), and Namakkal & Tiruchirappalli (Tamil Nadu), serving 168 industrial customers 202 commercial customers, 43,183 domestic customers, as at September 30, 2022.
In order to capitalize on synergetic its business opportunities, IRMEL entered into a strategic and technical partnership with Shizuoka Gas Co. Ltd, Japan ("ShizGas") fourth largest gas company in Japan by natural gas sales volume, by infusing capital through a private placement in IRMEL. On the other hand, in order to achieve business integration, it invested in Farm Gas Private Limited, Venuka Polymers Private Limited Ni Hon Cylinders Private Limited. Additionally, it has signed a memorandum of understanding ("MoU") with Mindra EV Private Limited for setting up an electric vehicle ("EV") charging infrastructure at DODO Stations and COCO Stations for a period of five years, with a vision of transitioning of becoming an energy oriented company.
As of September 30, 2022, IRMEL had an established a network of 56 CNG filling stations, comprising 2 owned and operated by the company (the "COCO Stations"), 30 owned and operated by dealers (the "DODO Stations"), and 24 owned and operated by oil marketing companies (the "OMC Stations").
IRMEL competes with both international and domestic players. Singapore-headquartered companies such as AG&P and Think Gas Distribution Private limited have established CGD companies in India, while France-based Total Energies SE has partnered with Adani Gas Limited to form Adani Total Gas Limited ("ATGL") are the international players, while it competes with domestic players like Mahanagar Gas Limited, Indraprastha Gas Limited, and Gujrat Gas Company Limited.
The company's revenue from operations increased by 145.38% from Rs 205.45 crore in the six months ended September 30, 2021 to Rs 504.12 crore in the six months ended September 30, 2022, primarily due to an increase in the sale of compressed natural gas, piped natural gas and increase in connection income and other operating revenue. Whereas, profit after tax decreased by 17.91% from Rs 47.81 crore in the six months ended September 30, 2021 to Rs 39.25 crore in the six months ended September 30, 2022 due to higher input gas cost.
Revenue for fiscal 2022 grew 157.85% to Rs 546.14 crore for the Financial Year 2022 from Rs 211.81 crore for the Financial Year 2021 and profit after tax grew 266.96% to Rs 128.03 crore for the FY 2022 against Rs 34.89 crore in FY21.
India's natural gas consumption increased a compound annual growth rate (CAGR) of 3.8% between Fiscals 2016 and 2020, rising to ~176 MMSCMD in Fiscal 2020. Natural gas demand from the CGD sector to log 15-16% CAGR between Fiscals 2022 and 2030, to 103-107 MMSCMD. According to a CRISIL report, demand from each sub-segment, including compressed and piped natural gas, is likely to grow at a healthy pace with expansion in the gas network to more cities. Increase in penetration is expected to be a key demand driver for the PNG and CNG segment.
HDFC Bank Limited, and BOB Capital Markets Limited are the book-running lead managers and Link Intime India Private Limited is the registrar to the issue. The equity shares are proposed to be listed on BSE and NSE.