Introduction:
The penultimate week of November 2020 promises a lot of excitement for IPO investors. At least four mainboard companies have announced their Initial Public Offerings (IPOs) to hit the markets this week. One of them is the Indian Renewable Energy Development Agency (IREDA) Limited. It will be the first Public Sector Undertaking (PSU) to go public since the Life Insurance Corporation (LIC) in May 2022.
The company plans to augment its capital base to meet working capital requirements from the money raised. It also seeks the benefits of being listed on the stock exchanges. Continue reading to learn more about the IREDA IPO, including issue size, price band, listing date, etc.
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About Indian Renewable Energy Development Agency Limited
Established in 1987, the Indian Renewable Energy Development Agency (IREDA) Ltd. operates as a public limited Mini Ratna (Category I) company under the administrative control of the Ministry of New and Renewable Energy (MRE) under the Government of India. The company’s primary objective is to promote, develop, and extend financial assistance for new and renewable energy (RE) projects and energy efficiency and conservation (EEC) across the country.
To date, the company has financed several projects belonging to RE sectors, such as solar power, wind power, biomass, hydropower, transmission, water-to-energy, and ethanol. It has also sanctioned loans to develop and implement new and emerging RE technologies.
Key Strengths of the Company
Below are the key strengths of IREDA Ltd. as highlighted in its Draft Red Herring Prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI):
- The company operates as a wholly-owned Government of India (GOI) enterprise
- It has played a significant role in implementing key government policies in the RE sector
- The largest pure-play green financing NBFC in India with an AUM of Rs. 470.7 billion (as of 31 March 2023)
- A resilient IT framework featuring an ERP system customized to meet specific business needs
- One of the most respected and trusted brands in a rapidly expanding industry
- The availability of varied and economically efficient long-term financing options
Exciting opportunities ahead: Don’t forget to apply for Upcoming IPOs!
Key Weaknesses or Risks Highlighted
Below are the key risks or weaknesses associated with IREDA Ltd:
- 60% of the assets are concentrated in only five Indian states
- Fluctuation in the interest rate can impact the profit margin and the net income
- The company has to follow the NBFC rules and regulations of the Reserve Bank of India (RBI)
- There is a substantial risk of borrowers turning into Non-Performing Assets (NPAs) due to project implementation failure
- Potential downgrade in credit ratings can impact the company’s reputation and growth
Key Financials of the Company
Analysing the financials of the issuing company allows you to gauge its growth potential and accurate valuations. This, in turn, helps you make informed investment decisions. The table below depicts the key financials of IREDA Ltd. for the last three completed financial years:
| Particulars |
Six-month Period Ended September 30, 2023 |
As of and for FY Ended March 31 |
| 2023 |
2022 |
2021 |
| Net Worth |
6,581 |
5,935 |
5,268 |
2,996 |
| Gross Loan Portfolio |
47,514 |
47,076 |
33,931 |
27,854 |
| Revenue From Operations |
2,320 |
3,482 |
2,860 |
2,655 |
| Net Interest Income |
785 |
1,324 |
1,128 |
992 |
| Profit After Tax |
579 |
865 |
634 |
346 |
| Net Interest Margins |
1.70% |
3.30% |
3.80% |
3.90% |
| Net NPA |
1.70% |
1.70% |
3.10% |
5.60% |
| Earnings Per Share (Diluted) |
2.5 |
3.8 |
8 |
4 |
| Return on Equity (%) |
9% |
15% |
15% |
13% |
| Return on Average Assets |
1% |
2% |
2% |
1% |
*Amount in Crores. Source – RHP Dated 11 November 2023 on SEBI website.
As visible, the financials of IREDA Ltd. are robust. The company’s net worth has improved from Rs. 2,996 crores in FY21 to Rs. 5,935 crores in FY23. The net interest income and profit after tax have also grown steadily. The return on equity (ROE) for the last financial year stood at an impressive 15%.
Details of IREDA IPO
IREDA IPO, comprising an offer for sale and a fresh issue worth Rs. 2150 crores, opens for public subscription on Tuesday, 21 November 2023, and closes on Thursday, 23 November 2023. As a retail investor, you can apply for a minimum of 460 shares (and in multiples thereof) within the price band of Rs. 30 to Rs. 32 per share.
Refer to the table below for more IPO details:
| IPO Date |
21 November to 23 November 2023 |
| Basis of Allotment |
29-Nov-23 |
| Listing Date |
04-Dec-23 |
| Face Value |
Rs. 10 per share |
| Price Band |
Rs. 30 to Rs. 32 |
| Lot Size |
460 shares |
| Total Issue Size (OFS + Fresh Issue) |
Rs. 2150 crores |
| Listing At |
NSE, BSE |
To conclude
Investing in the IREDA IPO provides an opportunity for investors to invest in a growing PSU company. But before investing, you must consider your risk appetite, investment goal, and horizon. With Motilal Oswal, you can open a free Demat account and invest in IPOs seamlessly.
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