This PSU stock has surged 97% from June lows; zooms 850% over issue price

Ireda stock hit a new high, crossing the Rs 300-mark for the first time. Ireda stock has surged 23% in two days ahead of Q1 results

Ireda shares rally today: Shares of Indian Renewable Energy Development Agency (Ireda) hit a new high on Friday, July 12. Ireda share price crossed the Rs 300-mark for the first time to hit an intraday high of Rs 303.85 after they surged 7 per cent on the BSE in the intraday trade.

Ireda share price extended its previous day's rally on positive growth prospects.  Meanwhile, the board of Ireda is scheduled to meet today to announce the audited financial results of the company for the quarter ended June 30, 2024 (Q1 FY25).

In the past two trading days, the stock of the public sector undertaking (PSU) has soared 23 per cent. Ireda stock has nearly doubled, zooming 97 per cent, from its previous month's low of Rs 154 touched on June 4. Ireda's stock price has skyrocketed 850 per cent against its issue price of Rs 32 per share. The company made its stock market debut on November 29, 2023.

At 10:20 AM, Ireda was trading 5 per cent higher at Rs 298.15 amid heavy volumes. In comparison, the BSE Sensex was up 0.17 per cent at 80,034. As many as 113.17 million shares have, together, changed hands on the NSE and BSE till the time of the writing of this report.

The loan book of Ireda has grown at a three-year compounded annual growth rate (CAGR) of 29 per cent to Rs 59,685 crore as on March 31, 2024. This is up by 27 per cent year-on-year (Y-o-Y). At 18 per cent, most of FY24's loan growth happened in Q4FY24.

In FY24, the company disbursed loans worth Rs 25,089 crore. Of this, Rs 12,869 crore (51 per cent of the disbursements in FY24) was made in Q4FY24 with 28 per cent of disbursements happening in March 2024. The slowed growth of the loan book in 9MFY24 is attributed to usual slow demand in the first half of the fiscal and company preparing for the IPO, CARE Ratings said.

Ireda's asset quality has been improving over the years with reducing gross NPA (GNPA) ratio to 2.4 per cent as on March 31, 2024, from 3.2 per cent as on March 31, 2023, owing to recoveries and upgrades. With rising provision coverage ratio, the net NPA (NNPA) ratio is also reducing with 0.99 per cent as on March 31, 2024 from 1.66 per cent as on March 31, 2023. Although, it is noted that the company is reducing its provisioning against the Stage 1 and Stage 2, per its strategy to reduce provisioning against a loan once the debt service reserve account is created, the rating agency said.

Meanwhile, Ireda is a strategically important entity for Government of India (GoI), mainly financing projects in the solar, wind, hydro, bio-energy sectors and emerging areas such as electric vehicles (EV), microgrids, state utilities for transmission and distribution, renewable energy (RE) manufacturing. The company has ventured in evolving avenues, including, battery storage value chain, pumped hydro storage, EV value chain, green hydrogen and wave and tidal energy.

The company provides a comprehensive range of financial products from pre-commissioning stage through loan syndication, term loan and letter of comfort, to post commissioning through refinancing existing loan/ bonds, term loan through securitisation, top-up, credit enhancement guarantee bonds and short-term loan, and bridge loan in the RE sector.

India is the third-largest producer and second-largest consumer of energy globally. The country's power demand has consistently increased and is further expected to increase at a CAGR of 4.8 per cent in FY24-27 with peak demand touching 277 GW in FY27. India's total installed power generation capacity stood at 428 GW (December 2023), with renewable sources contributing ~40 per cent (~172 GW). With focus to increase renewable capacity, the government aims to achieve a target of 500 GW by FY30, necessitating an investment of Rs 24.43 trillion, according to ICICI Securities.

Given the large gestation period in renewable projects limiting banks' ability to finance, specialised power financiers are expected to play a major role in funding renewable projects. Given Ireda's focus on financing RE sector, business growth is expected to remain healthy at ~25-30 per cent CAGR with market share expected at ~29 per cent in incremental financing in FY24-30E, thus touching an AUM of Rs 3.5 trillion in FY30E (as given in plan to achieve Maharatna status), the brokerage firm said. The stock, however, is trading above the analysts' target price of Rs 250 per share.