IREDA IPO is set to open on November 21; check out the details here!

The Indian Renewable Energy Development Agency Limited (IREDA) is a Mini Ratna (Category – I) Government of India Enterprise, operating under the administrative control of the Ministry of New and Renewable Energy (MNRE). Founded in 1987 as a non-banking financial company (NBFC), IREDA stands as a public limited government entity committed to fostering, advancing, and offering financial support for projects related to new and renewable sources of energy, alongside endeavours focused on energy efficiency and conservation.

Its financing programs span across diverse sectors, covering solar energy, wind energy, hydro energy, bioenergy, waste-to-energy, compressed biogas, and investments in new and emerging technologies. The company is preparing to initiate its Initial Public Offering (IPO) for equity shares, each with a face value of Rs 10. The IPO price range is set between Rs 30 and Rs 32 per equity share, resulting in a total issue size of Rs 2,150.21 crore at the upper price band.

The IREDA IPO is scheduled to commence on November 21, 2023, and will conclude on November 23, 2023. The market lot size for the IPO is 460 shares, with the option to apply for multiples of this lot. The offer includes both a fresh issue and an offer for sale. The company intends to allocate the net proceeds generated from the fresh issue to bolster the capital base, addressing future capital requirements and supporting ongoing lending activities.

The company has consistently exhibited strong growth in both revenue and net profit over the past few years. In H1FY24, it reported impressive figures, attaining a revenue of Rs 2,320 crore and a net profit of Rs 579 crore. The issue is priced with a P/BV ratio of 1.11 times, calculated using its Net Asset Value (NAV) of Rs 28.80 as of September 30, 2023. At the upper price cap, it is priced at a P/BV ratio of 1.09, considering its post-IPO NAV of Rs 29.28 per share. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the post-IPO fully diluted paid-up equity capital, the resulting PE ratio stands at 12, aligning considerably with the industry average.

The key risk for the business is associated with interest rate fluctuations, given its reliance on interest income generated from loans. Emphasizing the company’s pivotal standing as the largest pure-play green financing Non-Banking Financial Company (NBFC) in India is crucial. This position enables it to leverage the rapid expansion within the renewable energy sector, widely recognized as a sunrise industry. Furthermore, the sector experiences limited competition, further amplifying the company’s potential. Continue reading to gain insights into investor response, subscription levels, and the Grey Market Premium (GMP).

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.