From ₹190 to ₹304: This PSU stock surges 60% in July; hits all-time high ahead of Q1
Shares of Indian Renewable Energy Development Agency (IREDA) witnessed a strong rally in July, rising in 8 out of 10 sessions, from ₹190.45 at the close of trade on June 28 to an all-time high level of ₹304.60 in intraday today. The share price of the government-owned non-banking financial company (NBFC), engaged in financing the renewable sector, has zoomed 60% so far this month as compared to a 2.3% gain in the benchmark BSE Sensex and a 0.5% rise in the BSE Power index during the same period.
Continuing its gaining streak for the third straight session, IREDA shares rose as much as 7.4% to touch a new record high of ₹304.60, while the market capitalisation inching close to ₹80,000 crore mark. The PSU stock witnessed strong buying momentum ahead of its June quarter earnings report, slated to be released today.
IREDA, which made its market debut on November 29, 2023, has seen its stock price rising more than 850% against the initial public offering (IPO) price of ₹32 apiece. The counter touched its lowest level of ₹49.99 on its listing on domestic bourses. In the calendar year 2024, the PSU share has gained 180%.
The rally in IREDA shares can be attributed to capital infusion by the government of India, which led to some improvement in its competitive positioning, while stake hikes by foreign portfolio investors (FPIs) also boosted sentiments.
As per the latest shareholding pattern, FPIs held a 2.7% stake in IREDA at the end of June quarter, compared to 1.36% in the March quarter. On the other hand, domestic mutual funds have reduced their stake in the company to 0.24% from 0.53% as of March 31, 2024, amid profit booking at higher levels.
The data also showed that the number of small shareholders with an authorised share capital of less than ₹2 lakh rose to 22.15 lakh from 21.23 lakh in the January-March period of 2024.
Established in 1987, IREDA is an RBI-registered NBFC engaged in promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy.
Last month, CARE Ratings upgraded IREDA’s ratings for Non-Convertible Debenture (NCD) and Bonds of the company from ‘AA+’ to ‘AAA’, with a stable outlook. This was attributed to consistent growth in the loan book (27% YoY in FY24), along with significant rise in its tangible net worth (TNW) driven by initial public offer (IPO) and healthy internal accruals in FY24, translating to better capitalisation metrics. The rating also factored in the sustained dominant share of the renewable energy (RE) sector, improving asset quality and profitability metrics.
CARE in its report said that ratings also factored in consistent strategic importance of IREDA for the GoI with the entity being majorly owned by the GoI (75% as on March 31, 2024) and it being the nodal agency for promoting, developing and financing RE and energy-efficiency (EE) projects in India. Among others, the memorandum of understanding (MoU) between Ministry of New and Renewable Energy (MNRE) and IREDA for raising of government fully serviced bonds also augured well for the company.
With IREDA issuing IPO in November 2023, the TNW increased to ₹8,265 crore as on March 31, 2024, up 47% YoY from ₹ 5,629 crore as on March 31, 2023, providing the company cushion to fund future growth. The capital adequacy ratio also increased to 20% as on March 31, 2024 from 19% as on March 31, 2023. With the company in plans to issue Follow on Public Offer, CARE Ratings expects the capitalisation profile to remain comfortable.
The loan book of IREDA has also grown at a three-year compounded annual growth rate (CAGR) of 29% with ₹59,685 crore as on March 31, 2024, up by 27% YoY growth. Although, majority loan growth in FY24 at 18% growth happened in Q4FY24 alone. In FY24, the company disbursed ₹25,089 crore. Of this, ₹12,869 crore (51% of the disbursements in FY24) was made in Q4 FY24 with 28% of disbursements happening in March 2024. The slowed growth of the loan book in 9MFY24 is attributed to usual slow demand in the first half of the fiscal and the company preparing for the IPO, CARE said in its report.
Going forward, CARE Ratings expects the loan book to grow at a similar pace while maintaining the share of RE and loans to gencos and discoms.
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