The initial public offer (IPO) of Indian Renewable Energy Development Agency Ltd (IREDA) will close on Thursday, November 23. The largest pure-play green financing NBFC in India is looking to raise Rs 2,150.21 crore through its offering. The IPO consists of 67.19 crore shares, including a fresh issue of 40.32 crore equity shares by IREDA and an offer-for-sale of 26.88 crore shares by the Government of India.
IREDA IPO Timeline & Details: Everything You Need To Know
- IREDA IPO Price: IREDA has announced a price band of Rs 30 to Rs 32 per share for its IPO.
- IREDA IPO Opening Date: Subscriptions for the IPO start today Tuesday, November 21.
- IREDA IPO Size: The firm seeks to raise Rs 2,150.21 crore from its initial public offer, which comprises a fresh issue of Rs 1,290.13 crore and an offer for sale (OFS) of Rs 860.08 crore.
- How to Apply for IREDA IPO: Prospective investors can bid in lots, with each lot consisting of 460 shares of the company. To apply for the IPO, the minimum investment is set at Rs 14,720 (calculated as 32 x 460).
- Allotment Timeline: According to the IPO schedule, the IREDA IPO share allotment is expected to be finalized on November 24 or November 27.
- IREDA IPO Listing Date: The public offer is anticipated to debut on BSE and NSE on the 28th of November 2023.
- IREDA GMP: According to market observers, shares of IREDA are trading at a grey market premium of Rs 45 (a premium of 16% over the IPO price) as of today.
IREDA Anchor Round
Before the IPO's launch, IREDA raised Rs 643.26 crore from anchor investors on Monday, November 20, by allotting 20,10,19,726 equity shares at Rs 32/ share. Goldman Sachs, SBI Banking & Financial Services Fund, HDFC Mutual Fund, ICICI Prudential Midcap Fund, Nippon Life India AMC, Kotak India Equity Contra Fund, Aditya Birla Sunlife Mutual Fund, DSP Tax Saver Fund, BNP Paribas Arbitrage, Societe Generale, White Oak Midcap Fund, were among the notable investors who participated in the anchor round.
IREDA is a Government of India enterprise, operating under the Ministry of New & Renewable Energy for over 36 years. It specializes in promoting, developing, and financing renewable energy (RE) and energy efficiency and conservation (EEC) projects.
The firm offers extensive financial services, covering the entire lifecycle of RE projects, including aspects like project conceptualization, equipment manufacturing, and transmission.
- Diverse Loan Portfolio: As of September 2023, IREDA's loan portfolio is valued at Rs 47,514 crore, showing a robust 30% CAGR from FY2021 to FY2023. With 93.41% secured loans, it has a strong safety net against defaults.
- Solid Financial Growth: Between FY21 and FY23, the firm’s revenue grew at a 15% CAGR, while its net profit soared by 58%.
- Enhanced Profitability: The operating margin improved from 21.34% in FY21 to 32.69% in FY23, with net profit margin also increasing from 13.03% to 24.82%.
- Improved Asset Quality: Gross NPAs dropped significantly from 8.77% in FY21 to 3.13% by September 2023. Net NPAs also decreased from 5.61% to 1.65%, surpassing industry peers.
- High Capital Adequacy: As of September 30, 2023, the CRAR was 20.92%, with a Tier I ratio of 18.08% and Tier II at 2.84%, well above regulatory requirements.
- Loan Concentration Risk: As of September 2023, the largest borrower represents 3.9% of IREDA's loan book, with the top 5 borrowers comprising 16.2%, the top 10 making up 25.9%, and the top 20 accounting for 39.7%. Financial instability among these key borrowers could significantly impact the company's asset quality and financial performance.
- Geographical Loan Concentration: About 60.72% of the loan portfolio is concentrated in the top five states, making the company vulnerable to region-specific risks such as economic downturns, natural disasters, or regulatory shifts impacting renewable energy borrowers.
- Exposure to Foreign Currency Risks: As of September 2023, foreign currency borrowings constituted 24.31% of the company's total borrowings, exposing it to risks associated with foreign exchange rate fluctuations.
- Cash Flow Concerns: Over the past three years, IREDA has experienced negative operating cash flows. Persistent negative cash flow or significant liquidity issues could hinder the company's operational sustainability.
Our Verdict: Subscribe
As the largest pure-play green financing NBFC in India, IREDA shows significant growth in the renewable energy sector with a 30% CAGR loan book growth during FY21-23, surpassing peers like PFC and REC. Its expansion into emerging green technologies promises sustainable future growth.
In terms of valuations, the IPO is attractively priced at a price-to-book value (P/BV) ratio of 1.2x and price to earnings (P/E) ratio of 7.4x. Additionally, the grey market premium (GMP) for the issue indicates a premium listing.
Given the firm’s impressive track record, improved asset quality, fair valuations, and growth opportunities, investors can consider subscribing to this issue from a long-term perspective.
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