IREDA up 31% in four days on robust Q3 results; zooms 405% over issue price

Shares of Indian Renewable Energy Development Agency (IREDA) were locked at the 5 per cent upper circuit at Rs 161.75 on the BSE on Wednesday, as of 11:07 am. This was also the stock's fresh lifetime high on a healthy business outlook.

In the past four days, the stock of the state-owned financial institution has rallied 31 per cent after it reported a solid set of numbers for the December quarter (Q3FY24).

With today's gains, the stock has zoomed 405 per cent against its issue price of Rs 32 per share. The company made its stock market debut on November 29, 2023.

A combined 58.97 million equity shares changed hands till press time. There were pending buy orders for a combined 5.77 million equity shares on the NSE and BSE.

IREDA is a renewable energy (RE)-focused state-owned NBFC. Its 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.

IREDA has a diverse term loan portfolio, financing projects in various RE sectors like solar, wind, hydro, transmission, biomass, waste-to-energy, ethanol, compressed biogas, hybrid RE, EEC and green mobility.

For Q3FY24, IREDA reported a healthy 67 per cent year-on-year (YoY) increase in profit after tax (PAT) of Rs 335 crore, on back of healthy operational performance. Revenue grew 44.2 per cent YoY at Rs 1,253 crore.

This outstanding performance is attributed to consistent growth in the loan book and a significant reduction in net non-performing assets (NPAs) from 2.03 per cent to 1.52 per cent YoY.

Gross NPA declined to 2.9 per cent from 4.24 per cent in Q3FY23. IREDA said the outlook for India’s RE sector is positive, with major policy announcements & ambitious targets.

Meanwhile, PM Narendra Modi on Monday announced the launch of Pradhanmantri Suryodaya Yojana (PSY) that aims to install rooftop solar power systems at 10 million households across the country.

Last month, IREDA said the company has forayed into the retail division. This is geared towards emphasis on providing loans to borrowers in the PM-KUSUM scheme, Rooftop Solar, and other Business-to-Consumer (B2C) sectors.

IREDA is fully owned by the government, which held 75 per cent stake, and is of strategic importance for the promotion and development of the RE sector in India.

IREDA is the nodal agency for routing the Centre's various subsidies and grants to the RE sector like generation-based incentive schemes for solar and wind power projects, capital subsidy schemes for solar water heaters, and the IREDA-National Clean Energy Fund (NCEF) Refinance Scheme to refinance biomass (up to 10 MW) and small hydro (up to 5 MW) projects.

Rating agency ICRA believes IREDA will remain important to the govt and will play a major role in various renewable sector schemes, specially considering the increased importance of RE in the overall global landscape.

A significant change in IREDA’s strategic importance to the govt or a sustained decline in its profitability and asset quality indicators could warrant a rating/outlook change.

Going forward, ICRA believes that IREDA will continue to have good financial flexibility and will be able to mobilise funds at competitive rates.

The liquidity profile is strong, supported by the longer-tenure borrowings from multilateral agencies, which match well with the tenure of its advances, further supported by the on-book liquidity and unutilised sanctioned bank lines.

Given its good financial flexibility, ICRA expects IREDA’s liquidity to remain comfortable going forward as well.

Meanwhile, ICRA expects the solar PV module manufacturing capacity in India to increase to over 60 GW by 2025 from the current level of 37GW, with improved backward integration into cell and wafer manufacturing.

This is likely to further enhance closer to 100 GW as the capacity awarded under production-linked incentive (PLI) scheme comes on stream. This is led by the strong policy support and growing demand from domestic solar power installations.