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IREDA’s IPO: A Strategic Investment Opportunity

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Financial analysts at Reliance Securities and Mehta Equities have both issued a ‘Subscribe’ rating to the Indian Renewable Energy Development Agency (IREDA)’s Initial Public Offering (IPO), which opens on November 21. The IPO boasts a total issue size of Rs 2,150 crore, with a price band set at Rs 30-32 per share. Analysts are optimistic about IREDA’s prospects, considering factors like its robust growth track record, improvements in asset quality, and attractive valuations.

Financial Performance Highlights: IREDA has demonstrated substantial growth, with Assets Under Management (AUM) witnessing a remarkable 41% Year-over-Year increase as of September 2023. Fiscal years 2022 and 2023 show robust growth of 22% and 39%, respectively, accompanied by an impressive 83% and 36% growth in net profit. Despite valuation considerations at the upper price band, analysts believe the IPO presents a promising investment opportunity.

Strategic Positioning in Renewable Energy: As the largest pure-play green financing Non-Banking Financial Company (NBFC) in India, IREDA is strategically positioned to capitalize on the government’s ambitious renewable energy targets for 2030. The company’s nodal agency status and diverse financial products enhance its ability to seize opportunities in the growing renewable energy sector.

Solid Financial Metrics: IREDA’s financial performance includes a 58% Compound Annual Growth Rate (CAGR) in net profit from FY21 to FY23. The Capital-to-Risk Weighted Asset Ratio (CRAR) stood at 21.22% as of March 31, 2022, indicating a strong financial position. Total revenue witnessed a notable 21.7% increase, reaching Rs 3,481.9 crore in FY23.

Ownership Structure Changes Post-IPO: Following the IPO, the government’s stake in IREDA is expected to decrease from 100% to 75%, while the public stake is projected to increase to 25%, marking a significant shift in the company’s ownership structure.

Investors are urged to consider the potential for both short-term and long-term gains, aligning with the government’s initiatives to promote the Renewable Energy sector and achieve net zero emission targets by 2030.


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