IRMENERGY - IRM Energy

📊 NSE: IRMENERGY 🏢 Miscellaneous 📅 Last Updated: 12/14/2025 8:27

💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue from operations grew 18.6% YoY to INR 1,056.4 Cr in FY25 compared to INR 890.5 Cr in FY24. For H1 FY26, revenue reached INR 567.3 Cr, representing a 14.8% increase over H1 FY25 (INR 494.1 Cr). Growth is driven by increased gas volumes and infrastructure penetration across industrial, commercial, domestic, and automobile segments.

Geographic Revenue Split

Revenue is generated from four authorized Geographical Areas (GAs): Banaskantha (Gujarat), Fatehgarh Sahib (Punjab), Diu & Gir Somnath (Union Territory/Gujarat), and Namakkal & Tiruchirappalli (Tamil Nadu). While specific % splits per GA are not disclosed, Fatehgarh Sahib volumes were recently impacted by regulatory shifts regarding fuel usage.

Profitability Margins

Profitability showed a declining trend in FY25; Net Profit Margin fell to 4.63% from 9.62% in FY24. Gross Profit Margin decreased from 27.40% to 24.51% YoY. Return on Net Worth (ROE) declined from 9.19% in FY24 to 4.75% in FY25 due to higher input costs and lower volume growth in specific segments.

EBITDA Margin

Operating EBITDA margin declined to 13.40% in FY25 from 19.39% in FY24. EBITDA for FY25 stood at INR 130.8 Cr. The margin compression of approximately 600 basis points was primarily due to the inability to fully pass on high input gas prices and a temporary ban on polluting fuels in certain industrial clusters.

Capital Expenditure

The company has planned a capital expenditure of approximately INR 400 Cr over fiscals 2026-2028. As of September 30, 2025, total cumulative capex spent reached INR 906.92 Cr. Q2 FY26 standalone capex was INR 27.65 Cr, focused on expanding the CGD network in Namakkal & Tiruchirappalli and Diu & Gir Somnath.

Credit Rating & Borrowing

The company maintains a strong financial profile with an adjusted gearing of 0.13 times as of FY25. Interest coverage ratio stood at 4.34 times in FY25, down from 5.36 times in FY24. Borrowing costs are managed through a mix of internal accruals and IPO proceeds, with the company being nearly debt-free.

⚙️ Operational Drivers

Raw Materials

Natural Gas (comprising Administered Pricing Mechanism (APM) gas and imported Liquefied Natural Gas (LNG)). Raw material costs (Cost of Goods Sold) accounted for 69.7% of total revenue in FY25, amounting to INR 736.4 Cr.

Import Sources

Sourced domestically via APM allocations and internationally through imported LNG contracts. Specific countries are not listed, but procurement involves medium to long-term gas contracts to mitigate price volatility.

Key Suppliers

Not explicitly named in the documents, but the company depends on government-allocated APM gas and strategic partners for LNG sourcing.

Capacity Expansion

Current infrastructure includes 25-year exclusivity for laying pipelines and CNG outlets across 4 GAs. Expansion is focused on the Namakkal and Tiruchirappalli GA (awarded in the 11th round) and Diu and Gir-Somnath (9th round) to meet Minimum Work Programme (MWP) targets.

Raw Material Costs

Cost of Goods Sold increased to INR 736.4 Cr in FY25 from INR 585.1 Cr in FY24, a 25.8% increase, outpacing revenue growth and squeezing gross margins by 289 basis points.

Manufacturing Efficiency

Asset turnover ratio decreased from 0.92 in FY24 to 0.83 in FY25, indicating a temporary lag between capital deployment in new GAs and revenue generation.

Logistics & Distribution

Distribution is managed through a network of pipelines and CNG stations. Infrastructure exclusivity for 25 years ensures a protected distribution channel within authorized GAs.

📈 Strategic Growth

Expected Growth Rate

15-17%

Growth Strategy

Growth will be achieved through a 15-17% targeted increase in gas volumes, recovery in EBITDA to INR 5.5-6 per SCM, and aggressive infrastructure rollout in the Namakkal-Tiruchirappalli GA. The company is utilizing INR 300 Cr of IPO proceeds specifically for network expansion to meet MWP targets.

Products & Services

Compressed Natural Gas (CNG) for the automobile segment and Piped Natural Gas (PNG) for industrial, commercial, and domestic households.

Brand Portfolio

IRM Energy (IRMEL).

New Products/Services

Expansion into new GAs (Namakkal and Tiruchirappalli) is expected to contribute significantly to volume growth as infrastructure matures over the next 2-3 years.

Market Expansion

Targeting deeper penetration in the 4 authorized GAs, particularly in the recently awarded 11th round GA (Namakkal & Tiruchirappalli) where marketing exclusivity lasts until 2030.

Market Share & Ranking

Holds a 100% monopoly market share for natural gas distribution within its four authorized Geographical Areas due to regulatory exclusivity.

Strategic Alliances

Strategic partners include Enertech Distribution Management Pvt Ltd and Shizuoka Gas Co Ltd, who collectively hold a 23% stake. The company is a group entity of Cadila Pharmaceuticals Ltd.

🌍 External Factors

Industry Trends

The CGD industry is growing due to government push for a gas-based economy and environmental regulations. However, it faces disruption from fluctuating global energy prices and local regulatory shifts (like NGT rulings). IRMEL is positioned as a regional monopoly with long-term infrastructure rights.

Competitive Landscape

Monopoly in authorized GAs; competition is indirect from alternative fuels like electricity, coal, and LPG.

Competitive Moat

The moat is based on regulatory monopoly. It has marketing exclusivity for Diu & Gir Somnath until 2028 and Namakkal & Tiruchirappalli until 2030, plus a 25-year network exclusivity for infrastructure, making it highly sustainable against direct competition.

Macro Economic Sensitivity

Highly sensitive to crude oil price volatility and global LNG benchmarks, which influence domestic gas pricing and industrial demand.

Consumer Behavior

Shift toward cleaner energy (CNG/PNG) driven by environmental awareness and potential cost savings over liquid fuels.

Geopolitical Risks

Global gas supply uncertainties and international regulatory changes can impact the predictability of gas sourcing and pricing.

⚖️ Regulatory & Governance

Industry Regulations

Operations are strictly governed by the Petroleum and Natural Gas Regulatory Board (PNGRB) regarding pricing mechanisms, safety standards, and MWP targets. NGT rulings on coal usage in industrial clusters significantly impact demand for IRMEL's PNG products.

Environmental Compliance

Complies with PNGRB Integrity Management System (IMS) and SPCB norms. Costs are integrated into 'Other Expenses' and maintenance protocols.

Taxation Policy Impact

Effective tax expense for FY25 was INR 26.8 Cr on a PBT of INR 73.8 Cr, representing an effective tax rate of approximately 36.3%.

Legal Contingencies

The company is monitoring a dispute regarding the National Green Tribunal (NGT) ban on polluting fuels in the Fatehgarh Sahib GA, which has caused volume fluctuations. Specific case values in INR are not disclosed.

⚠️ Risk Analysis

Key Uncertainties

Under-achievement of Minimum Work Programme (MWP) targets in newer GAs could lead to regulatory penalties or loss of exclusivity. Potential impact on revenue could be 10-15% if targets are missed.

Geographic Concentration Risk

100% of revenue is concentrated in 4 GAs. Any regional economic slowdown or specific state-level regulatory change (e.g., in Gujarat or Punjab) poses a high risk.