“The PNGRB grants us the authorisation to operate in a GA, along with an exemption from being under the purview of a ‘common carrier’ or ‘contact carrier’ for the transmission of natural gas within our GAs. Exemption from the purview of a ‘common carrier’ or ‘contact carrier’ allows us exclusivity to operate in our GA and install our pipelines for the supply of natural gas. This exemption provides us with ‘marketing exclusivity’ for transmission of natural gas, for a limited period prescribed by the PNGRB,” explains CEO Karan Kaushal, a Bachelor of Technology in Electronics and Instrument Engineering from Punjab Technical University.

He has put in 15 years of experience in the fields of general management, strategy, business development and project management, having been associated with Kalpataru Power Transmission Limited, Isolux Corsan India Engineering & Construction Private Limited, KEC International Limited and Scope T&M Private Limited.

IRM Energy has exclusive marketing rights until June 2023 for the Banaskantha GA, the Fatehgarh Sahib GA until September 2023, the Diu & Gir Somnath GA until September 2028 and the Namakkal & Tiruchirappalli GA until March 2030.

Health and safety

“But what matters is trust, just like in any business,” says CFO Harshal Anjaria, a Bachelor of commerce degree holder from Saurashtra University. “Our relationship with vendors, suppliers and contractors has enabled us to expand our network in a timely and cost-efficient manner,” he says. IRM is also committed to health and safety. It has implemented safety management systems to ensure the safe, reliable and uninterrupted distribution of natural gas.

“Governance monitoring through internal processes and systems, coupled with our management team helps us achieve operational efficiencies. We have also established a well-rounded project management infrastructure for seamless and cost-efficient distribution of natural gas in all our GAs,” says Prashant Sagar, COO and EVP - PNG Projects. He holds a degree of Bachelor of Engineering in Electrical and Electronics Engineering from Manipal Institute of Technology and a degree of Master of Business Administration from Pandit Deendayal Petroleum University. 

“We have grown our revenue over the years, supported by healthy year-on-year growth in volume, driven by infrastructure augmentation as well as increased penetration in the Banaskantha and Fatehgarh Sahib GAs,” says Anjaria, an associate member of the Institute of Chartered Accountants of India. He was associated with Gujarat State Petronet Limited, ONGC Petro-additions Limited, Lanco Babandh Power Limited, and so on.

The company’s revenue from operations increased by 145.38 per cent from Rs205.45 crore in the 6 months ended 30 September, 2021 to Rs504.12 crore in H12022, primarily due to an increase in the sale of compressed natural gas, piped natural gas and increase in connection income and other operating revenue. Profit after tax, however, decreased by 17.91 per cent from Rs47.81 crore in the 6 months ended 30 September, 2021 to Rs39.25 crore in the 6 months ended 30 September, 2022 due to higher input gas cost.

Revenue for fiscal 2022 grew 157.85 per cent to Rs546.14 crore for FY22 from Rs211.81 crore for FY21 and profit after tax grew 266.96 per cent to Rs128.03 crore for FY22 against Rs34.89 crore in FY21.

Despite the monopoly situation, says Manas Khaire - EVP CNG projects & O&M, “we provide competitive offerings while maintaining a customer-centric approach and making continuous efforts to upgrade our services, by leveraging technology across all our customer operations”. IRM has established a distribution network of CNG and PNG to customers. The company serves 168 industrial, 202 commercial and 43,183 domestic customers, as per data from 30 September, 2022, says Manas Khaire, a degree of Bachelor of Engineering in Instrumentation Engineering from University of Mumbai.

“The dynamic business model ensures that we are abreast of the changing needs of IRM’s customers, with a focus on innovation and technology adaptation,” says Khaire who also holds a Diploma in Instrumentation from Maharashtra State Board of Technical Education. . “The customer spread across various industries and at varied geographies reduces our dependence on any one industry or location and provides a natural hedge against market instability in a particular industry or location. Moreover, the government’s strong focus on the expansion of the city gas distribution (CGD) network across the country will result in a rise in demand,” Khaire explains.

“We at Madhav Stelco have 15 years of excellence in rolling, with a manufacturing capacity of 1,50,000 MT annually. We replaced Furnace oil with PNG in January 2020 for our fuel requirement,” says Manish Jain, Director, Madhav Stelco, Mandi Gobindgarh, Fatehgarh Sahib. “We are impressed with the continuous supply and quality of fuel. The transparent billing system with daily monitoring of gross calorific value (GCV) enables us to optimise the usage of fuel,” says Jain.

The business has huge entry barriers such as large investments, but with Cadila’s support IRM overcome any hurdles, says Sahu. “The parent company stuck to its promise of not interfering with our day-to-day affairs and allowed full freedom to the qualified, experienced, and reliable senior management team who have been associated with the company since its incorporation,” he says.

On the latest engineering practices at IRM, Kaushal says the company has implemented supervisory control and data acquisition (SCADA) at all operational CNG stations as part of the automation process. “We have implemented the Radio Frequency Identification (RFID) Writing, Detection and Annunciation System, which aids us in digitally identifying the hydro-testing due date of CNG cylinders installed on-board vehicles and helps in reducing the probability of fatal incidents at CNG stations,” he says.

IRM has also developed a web-based application for capturing geo-tagged points and gas assets and their attributes in real time including an incident report module. For the fast adoption of PNG in steel re-rolling mills in Mandi Gobindgarh, Fatehgarh Sahib, the company has awarded the technology study assignment to Punjab State Council for Science and Technology, for setting up three model steel re-rolling plants of small, medium and large sizes running on PNG for identification of optimal burners, recuperators and automation to increase the fuel efficiency and reduce per ton fuel cost.

Ultimately, the company aims to reduce its operational costs through setting up independent captive solar power plants, as power costs are an operational expenditure for CGD companies. “Further, with ShizGas of Japan, which invested Rs41 crore in IRM, ShizGas and IRM shall both nominate their employees to participate in a joint technical committee, so as to evaluate methodologies and practices to further improve our business efficiency,” says Kaushal. 

Good practices

ShizGas’s technical expertise and good practices as an energy provider in Japan will add value to IRM’s business operations. In association with the Japanese partner, IRM will also implement good practices related to natural gas distribution, system engineering, operation and maintenance, and energy saving and CO2 reduction and share know-how in relation to LNG trailer and satellite tanks.

IRM Energy is now committed to the development of its 4th geographical area (GA) based on the actual record of achievement in its existing GAs, points out Ryota Saito, general manager of Shizuoka Gas. IRM Energy and Shizuoka Gas share the same policy – that is to contribute to the development of local society through supplying sustainable energy with low environmental impact.

Therefore, in the first place, Shizuoka Gas hopes to work together with IRM Energy to further distribute natural gas by utilising IRM’s knowledge of the city gas distribution business such as fuel conversion to natural gas. Going forward, as the long-term strategic partner in India, Shizuoka Gas will develop energy-related businesses and grow into an integrated energy company with IRM Energy.

With a clear vision towards transitioning to an energy-oriented company, IRM signed an MoU with Mindra EV Private Limited for setting up an EV charging infrastructure at dealer owned and dealer operated (DODO) stations and company owned and company operated (COCO) stations for a period of 5 years. “We have taken a series of digital initiatives such as digital payment solutions, spot billings, using GIS for planning, network design, asset integrity, incident/third party activity/emergency communication support, preventive maintenance planning, gas reconciliation and reporting and 24x7 customer support,” Kaushal explains.

The safety and quality of service is continuously monitored by IRM Energy by providing regular training to our forecourt staff for emergency handling and effective management of queue, according to Jayeshkumar Laxmanbhai Kharsan, CNG station manager, L K Petroleum, Chadotar, Palanpur.

“IRM has strategically acquired GAs with connectivity to cross-country natural gas pipelines within the GA boundary, which reduces the cost of transportation,” says company CMO Raghuvirsinh Solanki, a holder of a Bachelor of Engineering degree in Electrical Engineering from Gujarat University.

For instance, GAIL’s Dadri-Bawana Nangal gas pipeline passes through Fatehgarh Sahib, whereas the Gujarat State Petronet Limited (GSPL) gas pipeline passes through Banaskantha and Diu Gir Somnath, and the Indian Oil Corporation Limited’s Ennore Tuticorin pipeline passes through Namakkal & Tiruchirappalli. 

“Our mid to long term GSPAs with gas suppliers such as GAIL and RIL enable us to source gas at reasonable pricing as well as provide a seamless supply of gas to our downstream CGD networks,” says Solanki, an MBA from S K Patel Institute of Management & Computer Studies, Gujarat University.

The ban by the National Green Tribunal (NGT) on the usage of polluting fuels, primarily in Mandi Gobindgarh, Fatehgarh Sahib, has spurred overall growth in volumes from the industrial segment. On account of this, IRM’s industrial customers have grown from 30 to 96 from Fiscal 2020 to Fiscal 2022. “We believe that our strong financial position and healthy operating efficiency coupled with favourable regulations provides us with the financial flexibility to expand our network in our existing markets and expand to new markets in India. IRMEL competes with both international and domestic players,” adds Solanki.

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) – these are international players. The company also competes with domestic players like Mahanagar Gas Limited, Indraprastha Gas Limited, and Gujarat Gas Company Limited.

“IRM Energy is now going public, having obtained the final observation from markets regulator SEBI. It is a fresh issue with no offer for sale by the existing investors which reflects their confidence in the company and the business model,” says Sahu. The float is for 10.1 million shares with a face value of Rs10/- each. The price band and other issue details will be finalised in consultation with the IPO managers HDFC Bank Limited, and BOB Capital Markets Limited.

The promoters own 67.94 per cent of the shares of the Ahmedabad-based company, with the majority being held by Cadila Pharmaceuticals Limited (49.50 per cent), and the remaining shares being held by IRM Trust through its managing trustee, Dr Rajiv Indravadan Modi.

Capex funding

The proceeds from the fresh issuance worth Rs307.26 crore 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 Rs167.50 crore towards prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company.

India is not only the third-largest energy consumer in the world after China and the US but also one of the fastest growing energy consumers among its peers. Moreover, India has annually been reiterating its commitment to bring down carbon emissions as pledged at the Paris Agreement. The share of natural gas in India’s primary energy mix has increased from 6.3 per cent in 2020 to 6.7 per cent in 2021. This is still way below the global average share of 24 per cent, in global energy use.

The government has been consistently taking steps to develop natural gas infrastructure across the country. As of 30 June, 2022, the country had 21,946 km of natural gas pipelines in operation. It also plans to develop a vibrant gas market across the country through 13,262 km of additional pipelines, to complete the National Gas Grid (NGG).

Development of the NGG would connect all the major demand and supply centres in India. In addition, the government is taking various measures to promote the use and distributorship of liquified natural gas (LNG) through establishment/capacity enhancements of LNG terminals and regasification. It aims to create a regasification capacity of 70 mmtpa (million metric ton per annum) by 2030 and 100 mmtpa by 2040.

India’s natural gas consumption increased at a compound annual growth rate (CAGR) of 3.8 per cent between Fiscal 2016 and 2020, rising to ~176 MMSCMD in Fiscal 2020. Natural gas demand from the CGD sector to log 15-16 per cent 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.

“Against this backdrop, IRM looks forward to growing well in the future,” says a confident Sahu.