Thirty-six years after the Union government set up the Indian Renewable Energy Development Agency (IREDA) for promoting, developing and extending financial assistance for sustainable energy development, the agency is all set to go public through an initial public offering (IPO).
This is a welcome development as not only can IREDA raise money from the equity markets at rates that rates lower than other sources, it also provides a larger segment of the population to be a part of India’s renewable energy development goals in a more direct fashion.
The company recently submitted its draft red herring prospectus to the market regulator SEBI. A report published in The Mint noted that the IPO aims to bring 403.16 million fresh shares as well as an offer for sale of an additional 268.78 million additional shares. The issue would be on behalf of the government and conducted by the Ministry of New and Renewable Energy.
A mini-Ratna that has grown into a Navratna
The company, which was set up as a mini-Ratna public sector company back in 1987, currently holds assets under management to the tune of ₹47,206 crore that is invested across 23 states and five union territories. The company was part of the government’s effort to promote public sector companies to shift away from government accountability and become truly public.
India had announced a group of nine public sector companies as Navratnas that was provided with functional and managerial autonomy as part of the then government’s economic liberalization measures. Some of these early PSUs include BHEL, SAIL BPCL, BEL. HAL among others.
As an organization, IREDA was set up to offer a wide range of financial products that includes long-term, medium-term and short-term loans, top-ups and bridge loans as well as takeover financing, and loans secured against future cash flows and lines of credit to other NBFCs. The agency also provides non-fund based products such as letters of comfort, letters of undertaking, payment on order instruments, guarantee assistance schemes, and consultancy services.
IPO funds to be used for future lending
Details available in the prospectus suggest that funds generated from the public issue would be used to reinforce the agency’s capital base to enable it to meet future capital requirements while also continuing to support renewable energy projects through lending. The company has appointed IDBI Capital Markets & Securities, BoB Capital Markets and SBI Capital Markets as lead managers for the issue.
The documents also provide IREDA’s financials. During the 2023-24 financial year, the agency sanctioned ₹32,586.61 crore in loans, and during April-June it disbursed ₹1,892.45 crore. The creditworthiness of its debt instruments is affirmed by India Ratings (AAA Stable), ICRA (AAA Stable), and Acuite (AAA Stable).
Revenues for FY2023 grew by 21.75% compared to the previous year, reaching ₹3,481.97 crore. Moreover, the net profit exhibited significant growth, surging by 36.48% year-on-year to ₹864.63 crore. The Capital to Risk Weighted Asset Ratio stood at 18.82% for fiscal 2023, and for the first three months ending on June 30, 2023, it was at an even stronger 19.95%.