Positron Energy coming with IPO to raise Rs 51.21 crore

Positron Energy

• Positron Energy is coming out with initial public offering (IPO) of 20,48,400 shares in a price band Rs 238-250 per equity share.
• The issue will open for subscription on August 12, 2024 and will close on August 14, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 23.80 times of its face value on the lower side and 25 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Devang Ashvinkumar Shah.

Profile of the company

The company is engaged in Management & Technical Advisory Services of Oil and Gas Industry. It provides end to end solutions for Gas distribution to the Industries across India. It provides Management Consultancy Services like commercial and financial advisory, technical services including Project Management and O&M (Operation and Management) Services, across the Gas Sector in India. Its technical qualifications and empanelment with most industrial customers attest to its reliability and competence. Moreover, distribution of Natural gas is facilitated through common carrier pipeline networks operated by major public and private sector players in the Indian market.

The company is an ISO 9001:2015 and ISO 45001:2018 certified company. The quality certification is towards providing consultancy services, O&M services to the Oil & Gas sector. It has in-house capabilities to deliver a project from conceptualization to completion with fast turnaround time from acquisition to launch to completion, which focuses on de-risking and improving return on investment. Its core competence lies in professional management and attracting and retaining talent to maximize value creation. 

Since incorporation, it has provided services to major companies which are engaged in the Oil & Gas Sector, including both PSUs and private companies. The company has demonstrated a prominent presence in the Oil and Gas Sector and has developed significant expertise and competencies in this field. The company aims to leverage its strength and continue expansion into the Oil and Gas sector lead the company to desired growth trajectory.

Proceed is being used for:

• Meeting working capital requirements
• General corporate purposes

Industry Overview

The oil and gas sector is among the eight core industries in India and plays a major role in influencing the decision-making for all the other important sections of the economy. India’s economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to increase, thereby making the sector quite conducive for investment. India retained its spot as the third-largest consumer of oil in the world as of 2022.

The domestic Gross Production of natural gas for the from April-September 2023 period has shown an increase of around 4% when compared from April-September 2022 i.e., an increase of around 695 Million Metric Standard Cubic Metre (MMSCM) from 17184 MMSCM in April-September 2022 to 17879 MMSCM in April-September 2023. The LNG Imports in volume terms increased by around 12.7% i.e. from 13680 MMSCM in the period April-September 2022 to 15416 MMSCM in the period April-September 2023. However, the LNG Imports in US $ terms has shown a decrease of around 31.2% i.e. from $9.43 Billion in the period April-September 2022 to $6.49 Billion in the period April-September 2023. 

Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation. Crude oil consumption is expected to grow at a CAGR of 5.14% to 500 million tonnes by FY40 from 202.7 million tonnes in FY22. In terms of barrels, India’s oil consumption is forecast to rise from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and petrol covering 58% of India’s oil demand by 2045. Demand is not likely to simmer down anytime soon, given strong economic growth and rising urbanisation. Indian refiners would add 56 million tonnes per annum (MTPA) by 2028 to increase domestic capacity to 310 MTPA. India is planning to double its oil refining capacity to 450-500 million tonnes by 2030

Pros and strengths

Customized solutions and services: The company is providing cutting-edge technology and innovative solutions tailored to meet the specific requirements of its customers. Management and Technical expertise in the Oil and Gas sector give it a niche presence in the market, allowing for unique and out-of-the-box solutions. Moreover, it is focusing on diversifying the market by offering innovative solutions, competitive pricing, and superior customer service.

Adaptability to changing gas pricing landscape: The company is recognizing the evolving landscape in the natural gas sector, especially with the changing pricing dynamics. Moreover, actively diversifying its customer base and exploring new market segments in alignment with changing pricing structures. Seizing opportunities presented by the shift in subsidizing regimes and growing demand, contributing to industry advancement.

Diversified portfolio for future growth: Established competence in providing Management and Technical Advisory Services to major PSU and Private Sector companies in the Oil and Gas sector. It is venturing into new product development in collaboration with international partners, providing a stable platform for future growth. Further, the company has also entered in the field of new product development in collaboration with ICOM North America LLC (USA).

Risks and concerns

Dependent on few numbers of customers for sales: Its top ten customers contributed 77.77%, 87.55% and 95.42% of its total sales for the financial year ended on March 31, 2024, 2023 and 2022, respectively. Its business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on its business and results of operations. The loss of one or more of these significant or key customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows.

Prices of alternate fuel changes frequently: The prices of alternate fuel are linked to the prices of Indian Crude Basket which change frequently which could affect the gas sale and purchase of the company. In order to remain competitive in the market, it periodically reviews the price at which it sells natural gas, which it typically benchmark to the price of alternative fuels available to its customers. If it is unable to pass on any increase in the cost price of natural gas to its customers, its business, results of operations and cash flows could be adversely affected.

Price volatility and shortage of gas due to any war: The war like Ukraine war has significantly affected the gas sector, causing supply disruptions, price volatility, geopolitical shifts, and environmental implications. Sanctions on Russia and infrastructure damage in Ukraine have led to tighter global supply, contributing to rising prices. Increased demand for alternative sources and market uncertainty has further driven price fluctuations. Geopolitically, the conflict has prompted countries to reassess energy partnerships and focus on energy security, potentially leading to long-term shifts in global energy markets. The war's environmental impact includes increased reliance on fossil fuels and disruptions to renewable energy projects. The evolving situation makes the long-term impact on the oil and gas sector uncertain, but it is evident that the conflict will continue to shape the global energy landscape for years to come. It may not be able to procure adequate quantities of gas at optimum prices which may affect the profitability of its business.

Outlook

Positron Energy is engaged in Management & Technical Advisory Services of Oil and Gas Industry. It provides end to end solutions for Gas distribution to the Industries across India. It provides Management Consultancy Services like commercial and financial advisory, technical services including Project Management and O&M (Operation and Management) Services, across the Gas Sector in India. On the concern side, the price at which it sell natural gas is benchmarked to the price of alternate fuels available to its customers such as furnace oil, high speed diesel, other liquid fuels and Commercial LPG. Prices of alternative fuels are linked to the price of crude oil. As such, despite the benchmarking of the price of natural gas to the price of alternative fuels, any decrease in the prices of crude oil or other alternative fuels such that natural gas becomes a relatively expensive option for its customers, could result in a shift in customer preference to these alternative fuels, which could adversely affect its business, results of operations and cash flows. 

The company is coming out with a maiden IPO of 20,48,400 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 238-250 per equity share. The aggregate size of the offer is around Rs 48.75 crore to Rs 51.21 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operation has increased from Rs 5,142.64 lakh in FY 2022-23 to Rs 13,473.25 lakh in FY 2023-24 showing a growth of 161.99% from previous year i.e. FY 2022-23. It recorded an increase of 312.96% in its profit after tax from Rs 212.80 Lakh in the FY 2022-23 Rs 878.77 lakh in the FY 2023-24. Meanwhile, it has consistently delivered value by meeting or exceeding client expectations. This is crucial for growing its reputation. Other important aspects it has focused and shall keep focusing on are Networking, Financial Management, Sustainability Focus, Adaptability, Innovation and Strategic Planning. A key element of its growth strategy is to seek to improve the performance and competitiveness of its existing activities. It has strived to increase the scale and complexity of its projects in recent years and it intends to continue to focus on projects with higher contract values.