IREDA makes stellar debut; stock lists at 56% premium over its issue price

Indian Renewable Energy Development Agency (IREDA) made a strong stock market debut, with its shares listed at Rs 50, a hefty 56 per cent premium over its issue price of Rs 32 per share on the National Stock Exchange (NSE) and BSE on Wednesday.

Post listing, the stock of state-owned financial institution company moved higher to Rs 55.45, a 73 per cent premium against its issue price on the NSE. At 10:01 AM; the stock was trading at Rs 53.35, - up 67 per cent against issue price. A combined 203 million equity shares changed hands on the NSE and BSE in early deals.

IREDA is engaged in financing renewable energy (RE) and energy efficiency projects. The initial public offering (IPO) of state-owned IREDA had garnered nearly 39 times subscription. This was led by massive subscription from qualified institutional buyers at 104.57 times. The non institutional investors (NII) category was subscribed 24.16 timesand the retail category was booked at 7.73 times, while the portion reserved for employees also saw a strong 9.8 times subscription. IREDA offers a comprehensive range of financial products and related services, from project conceptualization to post-commissioning, for RE projects and other value chain activities such as equipment manufacturing and transmission.

IREDA’s portfolio reflects high asset quality as 78 per cent of loans in RE projects have already been commissioned, and have therefore started generating operating income. Further around 93 per cent of the loans are secured, while 77 per cent of loans are provided to private sector. Most of the brokerages had a 'Subscribe' rating on the IPO citing that the stock was attractively priced at 1.0x 1HFY24 P/BV (on an annualized & diluted basis). IREDA operates in niche segment of RE which is poised to grow at a rapid pace with government's increased focus. Further, elevation of IREDA to the ‘Schedule A’ category opens the door for “Navratna” status, which would strengthen the balance sheet further. This along with lowest cost of funding and stringent corporate governance provides IREDA a competitive edge, said Motilal Oswal Financial Services in IPO note.

IREDA’s 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. Over FY21-23, the company’s loan book has grown at a CAGR of 30 per cent to Rs 47,076 crore, much faster than traditional power financing companies like PFC & REC. Diversification and expansion in emerging green technologies like green hydrogen, pumped hydro storage power plants, battery storage value chain and green energy corridor provides scope for longer term sustainability of high growth of its loan book. On the back of low base, demonstrated track record of high growth, improvement in asset quality and cheap valuations at 1.1x trailing P/B (post issue), analysts at Nirmal Bang Securities said.