The Rs 2,150 crore IPO of Indian Renewable Energy Development Agency (IREDA) hits Dalal Street on Tuesday, November 21 for subscription. The PSU miniratna by the Ministry of Renewable Energy will be offering its shares in the range of Rs 30-32 per shares with a lot size of 460 equity shares. The bidding for the issue will close after three days, that is Thursday, November 23.
Indian Renewable Energy Development Agency is a government company, which has a miniratna status (Category-I) government enterprise. Incorporated in 1987, IRDEA is an experienced financial institution that has been actively promoting, developing, and extending financial assistance for new and renewable energy projects.
IREDA’s IPO includes a fresh share sale component of Rs 1,290.13 crore and the Government of India will offload 268,776,471 equity shares aggregating up to Rs 860.08 crore. The net proceeds from the fresh issue shall be utilized towards augmenting the capital base to meet future capital requirements and onward-lending.
IREDA has mopped up Rs 643.26 crore from 58 anchor investors on November 20 as it allocated 20,10,19,726 shares at a price of Rs 32 apiece. Marquee names including Goldman Sachs, Integrated Core Strategies (Asia), Societe Generale, GAM Star Emerging Equity, BNP Paribas Arbitrage, Moon Capital Trading, and Copthall Mauritius participated in the anchor book
In FY 2021-22, IREDA achieved the highest-ever loan sanctions of close to Rs 23,921 crore and loan disbursements of roughly about Rs 16,071 crore. It offers a comprehensive range of financial products and related services, from project conceptualization to post-commissioning, for RE projects and other value chain activities such as equipment manufacturing and transmission.
IREDA reported a standalone net profit of Rs 579.32 crore, with a revenue of Rs 2,320.46 crore for the period ended September 30, 2023, . The state-run PSU reported a bottomline of Rs 864.63 crore with a revenue of Rs 3,483.04 crore in the financial year 2022-23.
The company has reserved 50 per cent of issue for the qualified institutional bidders (QIBs), while retail investors will have 35 per cent of shares allocated for them. The remaining quota of 15 per cent shall be set aside for the non-institutional investors (NIIs) for the issue.
BoB Capital Markets, IDBI Capital Market Services and SBI Capital Markets are the book-running lead managers to the issue, while Link Intime India Private has been appointed as the registrar. Shares of the company will be listed on both BSE and NSE. Here’s what a host of brokerage firms say about the IPO of IREDA:
Anand Rathi Research
The company has a track record of growth, geared towards high quality assets and diversified asset book and stable profitability.
At the upper price band, the company is valued at P/BV of 1.3 times with a market cap of Rs 8,600.85 crore post issue of equity shares. We believe that the issue is fairly priced and recommend ‘subscribe’ rating to the IPO, said Anand Rathi.
With loan assets of around Rs 47,075 crore, IREDA is the largest pure-play green financing NBFC in India. To meet the net-zero emission target, the government has set a humongous target for RE installations by 2030. Considering its nodal agency status and varied financial products, IREDA is well placed to capitalize the growth in the RE sector, said Choice Broking with a ‘subscribe’ tag.
Nirmal Bang Securities
IREDA’s positioning as the largest pure-play green financing NBFC in India places it among the very few players who are well placed to capitalise on the rapid growth in the RE sector. Over FY 21-23, the company’s loan book has grown at a CAGR of 30 per cent to Rs 47,076 crore, much faster than traditional power financing companies like PFC & REC, said Nirmal Bang Securities.
“Diversification and expansion in emerging green technologies like green hydrogen, pumped hydro storage power plants, battery storage value chain and green energy corridor provides scope for longer term sustainability of high growth of its loan book. On the back of low base, demonstrated track record of high growth, improvement in asset quality and cheap valuations,” it added with a ‘subscribe’ rating.
IREDA has played a strategic role in the GoI’s initiatives for the promotion and development of the RE sector in India with a strong track record of growth, diversified asset book, high quality assets and consistent profitability. IREDA is maintaining its leadership in RE sectors and wants to enhance its presence in new green technologies optimizing costs, said Reliance Securities.
“It has access to cost effective long term sources of borrowings with a mix of domestic and foreign borrowings improving profitability over the past few years. IREDA has posted healthy profitability over the past couple of years, strong growth outlook and experienced management team, we recommend a ‘subscribe’ to the issue,” it said.
As a Mini Ratna enterprise, IREDA holds a pivotal position in the government’s renewable energy initiatives by financing such projects. The company’s stable operations are supported by its access to long-term financing sources. Also, the company has demonstrated consistent financial growth, said Swastika Investmart.
“However, the business remains susceptible to interest rate fluctuations. Additionally, its reliance on the renewable energy sector introduces a degree of industry-specific risk. The IPO is priced at a P/BV of 1.23 times, based on a NAV of 25.98, indicating a fair valuation. Thus, considering all these factors, we will assign Subscribe rating to this IPO,” he said.
IREDA operates with a distinctive business model tailored to a niche market. The government’s increased focus on renewable energy, aiming for 50 per cent of energy needs to be met by renewables by 2030, serves as a pivotal driver for the sector. The company is poised to capitalize on this opportunity, said SBICap Securities.
StoxBox by BP Equities
“As the lender will utilise the net proceeds of the fresh equity shares issue to augment its TierI capital base, its capital adequacy will enhance and lead to a stable leverage position. At the current P/BV multiple of 1.2 times, we believe the company is attractively valued and advise investors to ‘subscribe’ from a medium to long-term perspective,” said StoxBox by BP Equities.
Rating: Subscribe for long term
IREDA has strong financial track record and growth as GoI initiatives towards renewable energy projects, IREDA can get benefits which can boost company’s growth. On the other hand, the company could suffer if they are unable to maintain and effectively manage the quality of growing asset portfolio and NPAs, said Sushil Finance.
“Volatility in interest rates can affect its business. IREDA’s credit ratings for its bonds get downgraded in the past and sector volatility and technology risk is also there. Keeping in mind the favorable and unfavorable factors, the issue is fully priced, however being in the renewable energy sector one can consider long term investment,” it said.
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