The Indian Renewable Energy Development Agency (IREDA) Limited is gearing up for its IPO, scheduled to open on November 21 and close on November 23, 2023. As a Mini Ratna Category-I Government Enterprise, IREDA has demonstrated robust revenue and margin growth in recent years. This article will provide the details of the IREDA IPO, exploring positive, risk factors and a complete review.
IREDA IPO – Dates and Issue Details
| IPO Opening Date | 21-Nov-23 |
| IPO Closing Date | 23-Nov-23 |
| IPO Listing Date | 04-Dec-23 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 10 per equity share |
| IPO Price band | Rs 30 to Rs 32 per equity share |
| Lot Size | 460 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 2150.21 Crores |
| Fresh issue | Rs. 1290.13 Crores |
| OFS | Rs. 860.08 Crores |
About IREDA Limited:
IREDA Limited is wholly owned Govt of India enterprise under the administrative control of Ministry of New and Renewable Energy.
It is notified as a public financial institution and is a systematically important non-deposit-taking NBFC company with infrastructure finance company status.
They are a financial institution with over 36 years of experience in the business of promoting, developing and extending financial assistance for new and renewable energy projects, energy efficiency and conservation projects.
Company is also conferred with the Mini Ratna (Category I) status in 2015.
Company has been consistently been rated as “Excellent” by the MNRE in course of evaluation of its performance in achieving key targets.
IREDA Limited – Financials
| Financial Year ending / Period ending (Amt in Crores) | ||||
| Period Ended | 31-Mar-21 | 31-Mar-22 | 31-Mar-23 | 30-Sep-23 |
|---|---|---|---|---|
| Assets | 30,293.39 | 36,708.41 | 50,446.98 | 51,208.36 |
| Revenue | 2,657.74 | 2,874.16 | 3,483.04 | 2,320.46 |
| Profit After Tax | 346.38 | 633.53 | 864.63 | 579.32 |
| Net Worth | 2,995.60 | 5,268.11 | 5,935.17 | 6,580.61 |
| Reserves and Surplus | 1,386.12 | 1,776.05 | 2,310.96 | 2,550.36 |
| Total Borrowing | 24,000.00 | 27,613.07 | 40,165.23 | 39,850.19 |
IREDA IPO – Valuation
- Its IPO price band is Rs 30 to 32 per share
- If we consider last year FY23 EPS of Rs 3.78, P/E ratio works out to be 8x
- If we consider the last 3 years weighted EPS of Rs 5.3, P/E ratio works out to be 6x
- The listed peers like REC Limited trading at P/E 7.7x (Highest) and Power Finance Corporation is trading at P/E of 4.8x (Lowest) and industry average P/E is 6.2x. Hence, the IPO price band, with a P/E of 6x to 8x, is considered fully priced.
IREDA IPO – Positive Factors
- Company has strong track record of growth, geared towards high quality assets and diversified asset book and stable profitability
- Company‘s comprehensive data-based credit appraisal process and risk-based pricing, with efficient post-disbursement project monitoring and recovery processes helps them to grow.
- Government of India’s various initiatives would have significant growth in Renewable Energy sector. This would help company to grow at faster pace.
- Strong revenue and margin growth in the past.
IREDA IPO – Negative or risk factors
- IPO proceeds contain both fresh issue and OFS. Under Offer For sale (OFS), the proceeds would go to selling share holders (in this case it is Govt of India) and company would not benefit anything.
- Company business and financial performance could suffer if they are unable to effectively manage the quality of its growing asset portfolio and the level of NPAs.
- Volatility in interest rates could adversely affect its business.
- Company may be unable to secure borrowings on commercially acceptable terms and at competitive rates, which could adversely affect its business.
- Projects and schemes for generating electricity and energy through renewable sources like solar, wind, hydro, biomass, waste-to-energy and new and emerging technologies have inherent risks and, to the extent they materialize, could adversely affect company business.
- Company credit ratings have been downgraded in the past (India Ratings downgraded its bonds from AAA/Negative to AA+/Stable in 2020). Any future downgrade in its credit ratings could adversely affect its business.
- Company had negative cash flows from operations in the past. There is no assurance that such negative cash flows from operations shall not recur in the future.
- Investors need to go through all internal and external risk factors from IREDA IPO RHP.
IREDA IPO – Should you invest or avoid?
IRDEA, a Mini Ratna (Category I) Government enterprise is an 36 years experienced financial institution which is actively promoting, developing, and extending financial assistance for new and renewable energy projects, as well as energy efficiency and conservation projects. Company has strong track record of growth, geared towards high quality assets and diversified asset book and stable profitability. Govt of India initiatives towards Renewable Energy Projects is expected to boost company growth.
On the other side, the company could suffer if they are unable to maintain and effectively manage the quality of growing asset portfolio and NPAs. Volatility in interest rates can affect its business. Company’s credit ratings for its bonds got downgraded in the past. The OFS portion of the IPO goes to Govt of India and company would not get any thing. The IPO price is also fully priced.
Investors should not forget IRFC getting listed below the IPO price on listing day. Hence don’t invest expecting listing gains.
Investors should review all positive aspects and risk factors (both internal and external factors from the RHP) before investing in such IPOs for the medium to long term.
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Suresh ji, you mentioned about IRFC listing. In less than two years it has tripled. IREDA may or may not repeat. Any comments on that, sir.
Thank you in advance.
I talked about listing gains which every investor would like to know.
P/E is not the right metric for Banks. Should look at P/B. At 6900 network, a 8000 issue looks very reasonable and almost 15-20% discount to peers.
Is this LIC repeat?
LIC was also a hefty premium issue which flopped on listing. Similarly IREDA is also high/full priced issue. There is no GMP indicating that the issue is fully priced and that there is nothing left on the table for investors.
LIC – High valuations – We already knew it. It failed
IRFC / IREDA – Valuations are good – However, since these are PSUs not catching attention of investors in short term.