Indian Renewable Energy Development Agency IREDA’s Initial Public Offering (IPO) opens on November 21, with a total issue size of Rs 2,150 crore and a price band set at Rs 30-32 per share. The IPO consists of 67.19 crore shares, including a fresh issue of 40.32 crore equity shares by IREDA and an offer-for-sale of 26.88 crore shares by the Government of India.
Financial analysts at Reliance Securities and Mehta Equities have given a ‘Subscribe’ rating to the IPO. This favorable outlook is grounded in factors such as a robust growth track record, notable improvements in asset quality, and attractive valuations.
A closer look at the financials reveals IREDA’s substantial growth, with Assets Under Management (AUM) witnessing a remarkable 41% Year-over-Year increase as of September 2023. Fiscal years 2022 and 2023 show robust growth of 22% and 39%, respectively, accompanied by an impressive 83% and 36% growth in net profit.
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However, the valuation at the upper price band of Rs.32 raises considerations, as the company requests a Market Cap of Rs. 8,601 crore, with a Price-to-Book (P/B) multiple of 1.02x. Despite this, the recommendation from Rajan Shinde, Research Analyst at Mehta Equities Ltd, is to “Subscribe for listing gain” in the IREDA IPO, emphasizing its potential for both short-term and long-term gains in light of government initiatives to promote the Renewable Energy sector and meet net zero emission targets by 2030.
IREDA aims to mobilize a substantial Rs 2,150.21 crore through the IPO. The public offer, with a price band set at Rs 30-32 per share, will conclude on November 23. The net proceeds from the IPO are earmarked to bolster the capital base, meeting future capital requirements and facilitating onward lending. IREDA anticipates reaping the benefits of listing its equity shares on the stock exchanges.
As the largest pure-play green financing Non-Banking Financial Company (NBFC) in India, IREDA is strategically positioned to capitalize on the ambitious renewable energy targets set by the government for 2030. Analysts at Choice emphasize that IREDA, with its nodal agency status and diverse financial products, is well-equipped to seize opportunities in the growing renewable energy sector.
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“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 as 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,” said analysts at Reliance Securities.
IREDA has demonstrated a robust financial performance, boasting a 58 percent Compound Annual Growth Rate (CAGR) in net profit from FY21 to FY23. The Capital-to-Risk Weighted Asset Ratio (CRAR) stood at 21.22 percent as of March 31, 2022, indicating a strong financial position. Total revenue witnessed a notable 21.7 percent increase, reaching Rs 3,481.9 crore in FY23. Meanwhile, profit after tax surged by 36.4 percent to Rs 864.62 crore. In Q1FY24, the company reported a profit of Rs 294.6 crore.
Following the IPO, the government’s stake in IREDA is expected to decrease from the current 100 percent to 75 percent, while the public stake is projected to increase to 25 percent, marking a significant shift in the company’s ownership structure.
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