Ahmedabad-based city gas distribution company IRM Energy made a weak debut on the domestic stock exchanges on Thursday, which was below Street expectations. IRM Energy shares opened at ₹477.25 on the NSE, down 5.5% against the issue price of ₹505. On the BSE, the stock opened at a discount of 5.1% over the IPO price at ₹479 per share.
Post listing, the stock hit a high and low of ₹482 and ₹456.95 on the BSE, while the market capitalisation stood at ₹1,884 crore at the time of reporting. In comparison, the BSE Sensex was down 567 points at 63,482 level, and the Nifty50 tumbled 181 points to 18,941 mark.
The negative listing of IRM Energy was in sharp contrast to analysts' estimate as the stock was commanding a gray market premium (GMP) of around ₹30 per share in the unofficial market, indicating a listing gain of around 5-6%. The weak listing can be attributed to sustained bearish trend in the broader market.
“The IPO was well-received by investors, and oversubscribed by 27 times. However, the current market condition could be a reason behind such a poor listing,” says Shivani Nyati, Head of Wealth, Swastika Investmart.
“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. However the current market sentiment is not favorable for its listing, so investors may keep the stop loss at ₹455 and exit if the stock breaks this level,” Nyati adds.
The ₹545.4 crore initial public offering (IPO) of IRM Energy managed to garner strong response from investors, oversubscribing 27.05 times. The issue, which opened between October 18-20, was subscribed 9.29 times in the retail category, 44.73 times in the qualified institutional buyers (QIB) segment, and 48.34 times in the non-institutional investors (NII) category. The issue was completely a fresh issue of 1.08 crore equity share and there was no offer for sale (OFS) component.
The company had set price band in the range of ₹480 to ₹505 per equity share of face value of ₹10 and the minimum lot size for an application was 29 shares. The offer included a reservation of up to 216,000 shares for employees offered at a discount of ₹48 to the issue price.
Ahead of the IPO, IRM Energy raised ₹160.35 crore from anchor investors by allotted 31,75,200 shares at ₹505 apiece to 12 entities, including DSP Mutual Fund, Quant Mutual Fund, SBI General Insurance Company, HDFC Life Insurance Company, Bank of India Mutual Fund, ITI Mutual Fund, Nippon India, and PNB Metlife India Insurance Company.
HDFC Bank and BoB Capital Markets were the book running lead managers of the IRM Energy IPO, while Link Intime India was the registrar for the issue.
The company intends to use the net proceeds from the offering to fund the prepayment or repayment of all or a portion of certain outstanding borrowings obtained by the company. A part of the fund is also used to meet general corporate purposes and funding capital expenditure requirements for development of the City Gas Distribution network in the Geographical Areas of Namakkal and Tiruchirappalli (Tamil Nadu) in fiscal 2024, fiscal 2025, fiscal 2026, and fiscal 2027, according to the Red Herring Prospectus (RHP).
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