This report is for informational purposes only and does not constitute investment advice. Readers should conduct their due diligence or consult with a financial advisor before making investment decisions. This analysis is based on publicly available data as of Q2 FY25 and may not reflect the latest developments.
Investment Summary
IREDA, India’s premier green financing institution, operates under the administrative aegis of the Ministry of New and Renewable Energy (MNRE). With a market capitalization of ₹58,720 crores and its recent upgrade to a ‘Schedule A’ Central Public Sector Enterprise (CPSE), IREDA is poised for robust growth, driven by government policies promoting renewable energy and green infrastructure.
Key Highlights
Strong Revenue and Profit Growth:
- Revenue from operations increased by 35% YoY, reaching ₹3,139.83 crores in H1 FY25
- Profit after tax surged by 36% YoY to ₹771.44 crores in H1 FY25
Sectoral Diversification:
IREDA finances projects across solar, wind, hydro, biomass, ethanol, green hydrogen, and electric vehicles. Solar PV constitutes 26% of the loan portfolio, followed by wind energy (16%) and hydro (11%). Emerging technologies like battery storage and green hydrogen are growing contributors.
Operational Efficiency:
- Gross NPA improved to 2.19% as of September 2024 from 3.13% in March 2024
- Net NPA reduced to 1.04%, underscoring robust credit risk management
Government Ownership and Support:
- 75% ownership by the Government of India ensures policy alignment and financial backing
- IREDA serves as a nodal agency for MNRE’s renewable energy schemes, enhancing its strategic importance
Financial Overview
| Metric | H1 FY25 | YoY Change |
|---|---|---|
| Revenue (₹ Cr.) | 3,139.83 | +35% |
| Net Profit (₹ Cr.) | 771.44 | +36% |
| Gross NPA (%) | 2.19 | -0.94% |
| Net NPA (%) | 1.04 | -0.61% |
| Debt-Equity Ratio | 5.85 | Improved |
| Cost of Borrowing (%) | 7.80 | Stable |
| Net Interest Margin (%) | 3.34 | +0.17% |
Strategic Initiatives
Green Finance Leadership:
IREDA has maintained AAA domestic credit ratings, facilitating cost-effective borrowing. The company’s international S&P Global rating of ‘BBB-‘ supports global fundraising for renewable projects.
Capex and Expansion:
- Significant lending to state utilities and private entities ensures a well-distributed loan portfolio
- Expansion into emerging sectors like green hydrogen and energy storage strengthens future revenue streams
Regional and International Growth:
The establishment of a subsidiary in GIFT City and cross-border projects like Nepal’s hydro initiatives indicate global ambitions.
Growth Projections
- Revenue CAGR: 20-25% over the next five years, driven by increasing disbursements in renewables
- Profit Growth: Expected CAGR of 30% due to operational efficiencies and low-cost borrowing advantages
- Loan Portfolio: Likely to expand at a CAGR of 15-20%, focusing on solar, wind, and emerging technologies
Valuation
| Metric | IREDA | Peers (Median) |
|---|---|---|
| P/E Ratio | 40.6 | 30.8 |
| ROE (%) | 17.3 | 13.66 |
| Dividend Yield (%) | 0.0 | 1.5 |
IREDA trades at a premium valuation due to its strong growth trajectory and strategic role in India’s energy transition.
Risks
- High Valuation: The P/E ratio is significantly above industry peers, reflecting high growth expectations
- Low Dividend Yield: Lack of dividend payments may deter income-focused investors
- Sector Concentration: While diversified, reliance on specific RE technologies like solar and wind exposes the company to sectoral risks
Recommendation
Rating: Buy
Target Price: ₹280 (Upside of ~28% from current levels)
Rationale: IREDA’s strategic positioning, robust financial metrics, and alignment with national renewable energy goals make it a compelling investment. Potential policy support and international growth initiatives further strengthen the investment thesis.
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