There is a big news for those investing in the stock market. ‘Indian Gas Exchange’ (IGX), the largest and leading company in the country’s gas trading sector, is going to launch its IPO soon. The company has submitted its draft papers (DRHP) to the market regulatory body SEBI. With this step, the company has made full preparations to establish its dominance in the stock market. If you are also planning to bet in the stock market, then it is very important for you to know what is special in this issue and what is the real strategy of the company behind it.
The issue will be completely ‘offer for sale’
The most special thing about this IPO is that it will be a complete ‘Offer for Sale’ (OFS). This simply means that no new shares will be issued in the market through this IPO, nor will any new capital come into the company’s account. In this, the promoter company of IGX, Indian Energy Exchange (IEX) will sell a major part of its stake. According to the draft papers, IEX will launch 1.67 crore equity shares with a face value of Rs 10 in the market. Whatever amount will be received by selling these shares will go directly to the promoter company IEX. At present, the official announcement is yet to be made on which day this IPO will open and what will be its price band.
Why is the promoter company reducing its stake?
Now the big question arises that when the business is doing well, then why are the promoters selling their stake? Actually, there is an important regulatory rule behind this. At present, IEX has a major stake of 47.28 percent in IGX. But, according to the rules of ‘Gas Exchange Regulation 2020’, it is mandatory to reduce it to 25 percent. IEX is taking this step to comply with this legal rule. However, despite selling the shares, IEX will retain a significant stake in the company and will continue to influence important future decisions.
Company’s masterplan behind getting listed in the market
Even though IGX is not getting any new funds directly from this IPO, being listed in the stock market has many big benefits. The main goal of the company is to further strengthen its reputation and identity in the market. Listing in the stock market will increase the company’s brand value as well as transparency among common investors and big customers. This step will greatly help the company in expanding the scope of its business in future and creating a strong base.
Know the risks before investing
It is most prudent to understand every risk before investing money in the stock market. The company has clearly mentioned many challenges in its DRHP. The entire business model of IGX is based on the volume of gas trading. If the trading volume on the exchange decreases in future, it will have a direct and negative impact on the company’s earnings.
Apart from this, any disruption in the supply of natural gas, lack of availability of pipeline network and sudden changes in government policies can slow down the pace of business. The company has to strictly follow the regulatory rules; Violation of any rule may impair its functioning and cash flow. Also, the company’s revenue is highly dependent on a few large customers and third party services, which can prove to be a major risk factor for investors.
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