IREDA Receives Government Approval for Alternative Fundraise Mechanism

The Indian Renewable Energy Development Agency (IREDA) announced on Wednesday that it has secured government approval for an alternative mechanism to raise funds. The Department of Investment and Public Asset Management (DIPAM), acting upon the recommendation of a high-level committee, has authorised IREDA to dilute up to 7% of the government’s shareholding through a Qualified Institutional Placement (QIP) route.

This dilution will be based on IREDA’s post-issue paid-up equity share capital and can be implemented in one or more tranches. The move comes in response to IREDA’s August 29th approval of a fund-raising proposal worth up to ₹4,500 crore, which could be executed through various methods including a Follow-on Public Offer (FPO), QIP, preferential issue, or other suitable options.

As of June 30, 2024, the government held a 75% stake in IREDA. IREDA CMD Pradip Kumar Das expressed the company’s desire to issue fresh equity and reduce government ownership by up to 10%. He also acknowledged that the government’s stake would naturally decrease as funds are raised.

Das emphasized that successfully raising ₹4,500 crore would significantly bolster IREDA’s Capital to Risk (Weighted) Assets Ratio (CRAR), potentially increasing it to 25%. CRAR is a crucial metric that measures an entity’s capital against its risk exposure, indicating its financial stability and ability to meet obligations.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.