Ireda's high valuation may limit further stock upside

State-owned Indian Renewable Energy Development Agency's (Ireda's) chairman and managing director Pradip Kumar Das has announced that the company has requested the government to allow it to carry out a follow-on public offer (FPO) as it will need further equity infusion to maintain the pace of growth.

- DEVANGSHU DATTA

The FPO would aim to raise between ₹4,000 crore and ₹5,000 crore.

Ireda, which provides funding assistance and other services to renewable energy and energy efficiency/conservation projects and is 75 per cent owned by the government of India, has requested the Union Finance Ministry to be included under Section 54EC of the Income Tax Act, which will help reduce borrowing costs.

On the business front, Ireda's good loan growth and pipeline provides visibility. It has managed funding costs well, which can be seen in the stable cost of funds. But as the leverage increases, net interest margin (NIM) could come under pressure. The asset quality is good.

In Q4FY24, the net interest income (NII; interest earned minus interest expended) was 481 crore, up 35 per cent year-on-year (Y-o-Y) and 7.5 per cent quarter-on-quarter (Q-o-Q), driven by loan growth of 27 per cent Y-o-Y and 18 per cent Qo-Q. While, other operating income was ₹60 crore, up over 49 per cent Y-o-Y and up 39.7 per cent Q-o-Q.

The NIM can be calculated as a margin of 3.43 per cent.