IREDA Makes History with First Public Sector IPO in Renewable Energy Financing

The Indian Renewable Energy Development Agency (IREDA) is set to become the first public sector company to launch an initial public offering (IPO) after Life Insurance Corporation of India’s debut issue in May 2022. IREDA, a non-banking financial company (NBFC) specializing in lending for renewable energy projects, is gearing up to offer shares in the price band of Rs 30-32 each. The IPO is scheduled to open on November 21 and close on November 23.

Also Read: Indian Renewable Energy Development Agency Limited IPO Details

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Chairman and Managing Director Pradip Kumar Das, in an interview with Moneycontrol, highlighted IREDA’s pivotal role in India’s green financing sector and its ambition to explore new business opportunities. Das emphasized the need for additional capital to support the company’s expansion plans.

Perfect Timing for the IPO

Das addressed the timing of the IPO, acknowledging that there had been two unsuccessful attempts in the past. He explained, “When we come to the market, we have to ensure that there is a win-win situation for all. It is not only the corporates that need funds. Investors need to have a sustainable future as far as returns and wealth creation are concerned. The timing now is the most perfect, given that the renewable development in the last nine years in the country has been quite phenomenal.”

He further noted that IREDA had been a pioneer in financing renewable energy projects for 27 years, and with the substantial growth in the renewable energy sector, the company has a wealth of business opportunities that require capital infusion.

Also See: IREDA IPO GMP

Supporting Sustainable Growth

IREDA has been a significant player in green financing, with its loan book growing three-fold over the last three years. Despite the entry of competitors like Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) into the renewable energy financing space, Das expressed confidence in IREDA’s expertise and strong relationships with developers. He explained that IREDA would continue to be the preferred lender in the project construction stage.

Debt-to-Equity Ratio and Future Borrowings

Regarding the IPO’s impact on IREDA’s debt-to-equity ratio, Das stated, “We can leverage a maximum of up to eight times, but our strategy would be to leverage around 7 to 7+ so that we maintain a healthy CRAR of around 17, because we need to sustain our credit rating of โ€˜AAAโ€™ stable.”

He also mentioned that IREDA’s focus had expanded to include emerging opportunities such as e-mobility, green hydrogen, compressed biogas, and offshore wind, which would guide the company’s future lending decisions.

Also Read: IREDA IPO Opens on November 21, Price Band Set at โ‚น30-32 Per Share

Net NPA Ratio and Net Interest Margin (NIM)

IREDA’s net NPA ratio has significantly improved in the last two years, standing at 1.66 percent as of FY23. Das highlighted that the company had a robust review and monitoring mechanism in place. He also mentioned that NIM had improved and would reflect in the December quarter results.

Diversifying the Portfolio

IREDA’s strategic plan includes increasing the percentage of new and emerging businesses in its portfolio from the current 18 percent to 50 percent. Das acknowledged that the emerging space and new sources posed challenges but believed that they offered higher risk premiums and NIM.

No Plans for Universal Banking License

Das clarified that IREDA’s primary goal was to partner with the Government of India to accelerate renewable energy development with the highest corporate governance standards. As of now, there are no plans to apply for a universal banking license.

Equity Investments in Renewable Projects

IREDA’s commitment to sector development may lead to a revision of its philosophy and methodology in the future. Das mentioned the company’s interest in raising funds and lending foreign exchange to domestic developers, signaling a willingness to adapt to evolving opportunities in the renewable energy sector.

IREDA IPO

The upcoming IREDA IPO is expected to play a crucial role in providing the capital needed to fuel India’s renewable energy growth and contribute to building a sustainable economy while preserving the environment for future generations.

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