IREDA extends rally on heavy volumes; hits record high, soars 15% in 3 days

The stock hit a record high of Rs 218.80, soaring 6.5% in Wednesday's intra-day trade, surpassing its previous high of Rs 215 touched on February 6, 2024.

IREDA in focus: Shares of Indian Renewable Energy Development Agency Limited (IREDA) hit a record high of Rs 218.80 per share, soaring 6.5 per cent on the BSE in Wednesday’s intra-day trade amid heavy volumes. The stock surpassed its previous high of Rs 215 touched on February 6, 2024.

The stock of state-owned financial institution was trading higher for the third straight day, surging 15 per cent during the period. It recovered 42 per cent from its previous month low of Rs 154 touched on June 4.

At 10:28 AM, IREDA stock was trading 5 per cent higher at Rs 215.80, as compared to 0.66 per cent gain in the BSE Sensex. The average trading volumes on the counter more than doubled. A combined 77.53 million shares changed hands on the NSE and BSE.

 

IREDA is a systemically important non-deposit taking non-banking financial company engaged in financing of renewable sector. IREDA is engaged in field of promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy, energy efficiency & conservation. The company has geographically diversified asset base with term loans outstanding across 23 states and 5 union territories.

Last month, IREDA successfully raised Rs 1,500 crore through issuance of bonds, received an overwhelming response from investors, being oversubscribed 2.65 times. This capital raising will enable the company to further strengthen efforts in financing green energy projects, contributing to India’s goal of achieving 500 GW non-fossil fuel installed capacity target by 2030, IREDA had said.

IREDA is the nodal agency for providing subsidies and grants issued by the Government of India (GoI) in the RE sector such as generation-based incentive schemes for solar and wind power projects, capital subsidy schemes for solar water heaters and National Bioenergy programme.

It is the implementing agency for the Production Linked Incentive scheme for ‘High Efficiency Solar photovoltaic (PV) Modules’ and Central Public Sector Enterprises (CPSE) Scheme (Government Producer Scheme) of the Ministry of New and Renewable Energy (MNRE), to establish 12,000- MW grid connected solar PV power projects. 

IREDA has also been instrumental in implementing several MNRE schemes, as the ministry provides budgetary support for research and facilitates development through different institutions, promotes private investment through fiscal incentives, tax holidays, depreciation allowance, and remunerative returns for power fed into the grid.

CARE Ratings expects IREDA to continue being strategically important to GoI, and will continue to play an important role in the development of the renewable energy (RE) sector in the country.

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 compund annual growth rate (CAGR) of 4.8 per cent in FY24-27 with peak demand touching 277 GW in FY27.

Meanwhile, India's total installed power generation capacity stood at 428 GW (December 2023), with renewable sources contributing approximately 40 per cent (approximately 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, analysts at ICICI Securities said.

Given 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 focus on financing RE sector, business growth is expected to remain healthy at approximately 25-30 per cent CAGR with market share expected at ~29 per cent in incremental financing in FY24-30E, thus touching an asset under management (AUM) of Rs 3.5 trillion in FY30E (as given in plan to achieve Maharatna status), the brokerage firm said in stock report.

“Given government’s focus on renewable sector, we remain positive on long term growth prospects which will aid long term sustained growth in AUM. Thus, we assign a Buy rating on the stock with a target price of Rs 250, valuing the business on DCF basis assuming discounting rate at 12 per cent and terminal growth at 6.5 per cent,” analysts added.