IREDA Gets Approval for IPO. Will it be Second Time Lucky?

By Prasanna Singh/ Updated On Wed, Oct 9th, 2019

IREDA Crosses Highest Annual Loan & Sanction Loan Disbursement for Renewable Energy Projects

The Integrated Renewable Energy Development Agency ( IREDA), a 100% owned entity of the government of India, has got final nod for an IPO from SEBI, the market regulator.

The final regulatory approval clears the way to the much awaited initial public offering (IPO) for the state owned firm. While the firm had last targeted it before September end, now the hope is to see it close the issue before 2019 ends. The firm had tried much earlier too for the IPO, back in July 2018 when it had received the nod from SEBI. However, it had shelved plans due to poor market conditions.

For IREDA, which finances green energy projects, the regulatory clearance is one more effort to get a more public profile as a listed entity, besides raising some much needed equity capital through the issue of 139 million fresh shares at a premium. The sale is expected to be approximately 15% of its equity base, currently 100% government owned. The firm disbursed loans for close to Rs 9385 crores in 2018-19, and reported a profit after tax of Rs 244 crores, a steep fall over the Rs 370 crore figure it had reported in 2017-18 .

The plans are to raise an estimated Rs 700-750 crore from the IPO, itself a climb down from a reported plan to raise Rs 850 crores earlier. Which would indicate a target price in the range of Rs 50 or below.

Subject to its successful completion, IREDA will join listed peers such as the state-owned Power Finance Corporation as well as PTC India Financial Services besides other entities that provide funding to the renewable energy sector. Private entities like L&T finance have also picked up a lot of slack in financing renewable projects in recent years.

So just why is IREDA’s issue important? On the face of it, the firm , as a key financier of renewable projects, a sector that is already almost stalled due to issues linked to financing and policy , IREDA’s health is important. Secondly, as a government entity, IREDA’s travails are one way for the message to go across to the government, about the health of the sector. With reported gross NPA’s of over 6 percent for the past three years , and an almost 25% exposure to Andhra Pradesh based projects, IREDA is exposed to the political idiosyncracies being witnessed in that state very strongly.

One hopes that a wish for its success will push to government to move faster to resolve the crisis the Andhra Pradesh renegotiations and reneging on signed contracts has caused to the sector.