IREDA IPO Review: IREDA Limited, a Mini Ratna company, is coming up with its Initial Public Offering. The IPO will open for subscription on November 21, 2023, and close on November 23, 2023. In this article, we will look at the IREDA Limited IPO Review 2023 and analyze its strengths and weaknesses. Keep reading to find out!

IREDA IPO Review – About The Company

Indian Renewable Energy Development Agency Limited, founded in March 1987, is a Mini Ratna (Category – I) government firm. It is administratively controlled by the Ministry of New and Renewable Energy (MNRE). 

For over 36 years, it has been actively promoting, developing, and extending assistance for new and renewable energy projects, as well as energy efficiency and conservation projects.

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The company provides a full variety of financial products and related services for RE projects and other value chain operations such as equipment manufacturing and transmission, from project conceptualization to post-commissioning. 

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IREDA IPO – About The Industry

The outstanding credit of major financing Non-Banking Financial Companies (“NBFCs”) reached roughly  ₹9,399 billion in Fiscal 2023, at a 10% CAGR from Fiscal 2019. 

Power financing NBFCs are likely to maintain their growing momentum in Fiscal 2024, driven by increased power demand, population growth, renewable integration, and India’s sustainability goals. 

By 2030, financing requirements for renewable energy sectors such as solar and wind are expected to rise sharply in line with the government’s goal of 500 GW of built non-fossil fuel-based electricity capacity.

IREDA IPO Review – Financial Highlights

If we look at the financials of IREDA Limited we notice that their term loans outstanding have increased from Rs.27,853.92 crores in March 2021 to Rs. 27,853.92 crores in March 2023. As of FY24, its term loans outstanding stood at Rs. 47,514.48 crores in the past six months

Though its term loans have increased year-on-year, the company has a decreasing GNPA. During Q2FY24, the company has reported a GNPA of 3.13% from 8.77% during FY21. This indicates that the company has significantly reduced its defaults from borrowers. 

Similarly, it has increased its ROA year-on-year and it was reported at 1.98% during FY23.

Coming to the revenue generation of the company, we can see that the company has increased its total income from Rs. 2657.74 crores in FY21 to Rs. 3483.04 crores in FY23. As of FY24, its six months total revenue stood at Rs. 2320.45 crores.

Key Players in the Market

The company’s primary peers are from power sector financing NBFCs, primarily focused on financing of power generation, transmission, distribution and other such activities.

These NBFCs provide funds for various types of power projects, including transmission lines, thermal power plants and renewable energy projects such as solar power plants, wind farms, hydroelectric projects, bioenergy energy projects and clean energy generation.

Some of the company’s competitors include Power Finance Corporation Limited, India Infradebt Limited, REC Limited, Tata Cleantech Capital Limited and PTC India Financial Services Limited. 

Strengths of the Company

  • The company’s interaction with GoI entities and deep understanding of policies gives it access to business opportunities, the ability to structure financing solutions, and effectively appraise project risks, giving it an advantage over other financing entities.
  • The company’s position as the largest pure-play green financing NBFC in India places it among select players well placed to capitalise on the rapid growth in the renewable energy sector.
  • The company offers a digital procedure for borrower centricity and operational scalability. This has allowed it to have Term Loans Outstanding of ₹47,514.48 crores across 23 States and five Union Territories. (As of September 30, 2023)
  • The company has comprehensive credit appraisal policies and procedures which enable it to effectively appraise and extend financial assistance to various RE projects, including new and emerging RE sectors and also allow it to maintain asset quality
  • The company believes that its classification as a Public Finance Institution and its credit ratings enable it to access diversified funding options.

Weaknesses of the Company

  • The business of the company is dependent on the interest income from the loans disbursed by the company. Volatility in interest rates could adversely affect its hedging instruments, net interest income and net interest margin of the company.
  • The company relies on its timely access to, and the costs associated with, its borrowings for onward lending. If it is unable to secure borrowings on commercially acceptable terms and at competitive rates, its business will be adversely affected.
  • The company has had instances of non-compliance with covenants under its financing agreements in the past (including with the Asian Development Bank in relation to the maintenance of the GNPA level. Such non-compliance in the future can adversely affect the company’s reputation, cash flows and results of operations.
  • Certain DISCOMs purchase electricity from the borrowers of the company and certain states have sought revision in the terms of their existing PPAs. A downward revision in the tariffs could negatively affect the cash flows and financial conditions of the borrowers and may affect their repayment capabilities.
  • Some of the company’s historical corporate records concerning the allotment of its Equity Shares are not traceable. The company cannot assure that there will not be any imposition of penalty in relation to these matters in the future. 

IREDA IPO Review – Grey Market Premium (GMP)

The shares of IREDA Limited traded at a premium of 9.38% in the grey market on November 14th, 2023. The shares tarded at Rs 35. This gives it a premium of Rs 3 per share over the cap price of Rs 32.

IREDA IPO Review – Key IPO Information

IPO Size₹2,150.21 Cr
Fresh Issue₹1,290.13 Cr
Offer for Sale (OFS)₹860.08 Cr
Opening dateNovember 21, 2023
Closing dateNovember 23, 2023
Face Value₹10 per share
Price Band₹30 to ₹32 per share
Lot Size460 Shares
Minimum Lot Size1
Maximum Lot Size13 (5980 shares)
Listing DateDecember 4, 2023

Promoters: The President of India acting through The Ministry of New & Renewable Energy, Government of India.

Book Running Lead Manager: IDBI Capital Markets & Securities Limited, Bob Capital Markets Limited and Sbi Capital Markets Limited

Registrar to the Offer: Link Intime India Private Limited 

The Objective of the Issue

The following are the objectives of the issue:

  • To augment the company’s capital base to meet future capital requirements and onwardlending.
  • To receive the benefits of listing the Equity Shares on the Stock Exchanges, including enhancing the brand image among existing and potential customers and creating a public market for the Equity Shares in India.

In Closing

In this article, we looked at the details of IREDA IPO Review 2023.  Given the increasing focus on the government on renewable energy coupled with the company’s strong ties with the government and it strong financials, the company’s outlook appears favourable for the future. 

What do you think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.

Written By Aaron Vas

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