The IREDA IPO is set to open on November 21, with the Company hoping to raise Rs 2,150.21 crore through a fresh issue of 40.31 crore shares and an offer-for-sale of 26.87 crore shares. As India’s most significant pure-play green financing NBFC, this could be an excellent opportunity for investors looking for a long-term investment and those looking to add an ESG-compliant company to their portfolio. If you fall into these categories, here’s your chance!
📑 About IREDA
IREDA, or Indian Renewable Energy Development Agency, promotes and extends financial assistance to projects in the new and renewable sources of energy and energy efficiency/conservation space. Established as a NBFC in 1987, IREDA is a Government of India enterprise under the control of the Ministry of New and Renewable Energy (MNRE).
Here are some critical details about this Company:
IREDA is India’s most significant pure-play green financing NBFC in India.
It has the largest share in credit towards the Renewable Energy sector other than PFC, which is also present in different sectors such as infrastructure, roads, etc. At the same time, IREDA is wholly focused on the RE sector.
It has a pan-India presence.
As of September 30, 2023, it has Term Loans Outstanding across 23 states and five Union Territories in India, making it a leading financial institution in the renewable energy sector across India, with over 36 years of experience and expertise in the development and implementation of various policies and schemes for structural and procedural reform in the RE sector.
IREDA’s strong ESG background will boost investor confidence in the Future.
IREDA’s work aligns with the RE priorities of the GoI, such as solar, wind, hydropower, biomass, and co-generation. They provide consulting services on techno-commercial issues relating to the RE sector, such as entering an MoU with Brahmaputra Valley Fertilizer Corporation.
⏳ IREDA’s Vision for the Future
The Global investment in energy transition has increased to USD 1.1 tn in CY22 against USD 267 bn in CY11, i.e. a 15% CAGR growth in investments towards green energy space. India, one of the densest populated nations, with 17% of the world population living in 2% of available land area, is already facing excessive pollution by trying to meet its energy demands through fossil fuel burning.
Post IPO, IREDA intends to use the funds for their existing projects that are already underway, as well as future projects in the Renewable space. The listing also aims to improve the Company’s brand image among its existing and potential customers.
💰 Issue Details of IREDA
|IPO Dates||21st November 2023 to 23rd November 2023|
|Face value||₹10 per equity share|
|Price band||₹30 to ₹32 per share|
|Market lot||460 shares|
|Minimum Investment||₹13,800 to ₹14,720|
|Listing on||BSE and NSE|
|Offer for sale||Fresh Issue of ₹1290 Cr (OFS: ₹860 Cr)|
|Registrar||Link Intime India Private Ltd.|
🪙 Total Issue Price
|Fresh Issue||₹1290 Cr|
|Qualified Institutional Bidders (QIB)||50%|
|Non-Institutional Bidders (NIB)||15%|
🔭 IPO Object
The proceeds received by the Company will be used for the repayment and/or pre-payment of certain borrowings, including the redemption of Non-Convertible Debentures in full.
⛓️ IPO Strengths
- Understanding of GoI Policies: As a GoI entity, the Company has a deep knowledge of policies. This gives it access to business opportunities, the ability to structure financing solutions, and effectively appraise project risks, giving it an advantage over other NBFCs.
- Largest Green NBFC: The Company’s position as the most significant pure-play green financing NBFC in India allows it to capitalise on the rapid growth in the renewable energy sector.
- Comprehensive Appraisal Procedure: It 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.
- Credit Rating: Its classification as a Public Finance Institution and its credit ratings enable it to access diversified funding options.
⚠️ IPO Risks
- Asset Management: The business and its financial performance could only improve if it can manage the quality of its growing asset portfolio and control the level of its NPAs.
- Growing NPAs: The Company’s NPAs may increase if borrowers are unable to repay loans due to factors like a delay in the payment from state electricity distribution companies, tariff and regulatory-related issues, force majeure events like droughts, floods, etc., delay in project implementation and commissioning, etc.
- Volatile Interest Rates: Volatility in interest rates could adversely affect the business, hedging instruments, net interest income and net interest margin, which in turn would affect the business and its operations.
- Credit Ratings: The Company’s credit ratings have been downgraded in the past. Any future downgrade in credit ratings could affect the business and its financials.
As a GoI Entity and a green enterprise, IREDA is well-positioned for future growth. The IREDA IPO is expected to give good listing gains and will be an excellent long-term investment, especially in the expanding renewable energy sector.