Indian Renewable Energy Development Agency: Should we invest in this company? All you need to know about Ireda share.

 

In our recent article about the expectation of future energy demand , we saw that the energy demand is expected to rise 2.5 times by 2047. So, it is sure that there is a requirement of huge capital in order to set an energy generation plant to meet such a increasing power demand. Now with heat waves across the country, the energy demand has surged a lot. In India, growing number of industries and other businesses is also a reason for the surge expected in energy demand. 

Now we have to understand that it not possible for a company to fund the expansion by its own capital. It will definitely require funds from an external source. Here comes the role of IREDA. 

Outlook of the company:

Indian Renewable Energy Development Agency Ltd. is a listed public Navaratna company. It is a government company under the administrative control of the Ministry of New and Renewable Energy [MNRE]. It is a non banking finance company [NBFC] which was established in 1987.

The main objective of the company is to provide financial support for the specific projects and schemes for generating energy through new and renewable sources, and conserving energy through energy efficiency. 

Last year [2023], the company was classified as 'Infrastructure Finance Company'. The company is not only engaged in financing the capex requirements of the companies, but also for ordinary citizens of the country also. Under the PM-KUSUM Scheme, the company provides financial support for installation of roof top solar. 

Now let us jump into the fundamentals of the company to know more about its stock performance and expectations. 

Fundamentals of the company:

The company made its debut in stock market in November 2023. The IREDA ipo price was at Rs. 35 but listed at a premium of 87.5% at Rs. 60 per share. It is currently traded at Rs. 181 per share as on 29th April. 

• ROCE: 9.35%
• ROE:17.3%
• Stock P/E: 38.9
• Industry P/E: 17.2
• RSI: 66.6

This company has reduced its both GNPA and NNPA on a year-on-year[Y-o-Y]basis. Revenue from operations have also increased on both Y-o-Y and quarter-on-quarter [Q-o-Q] basis. Its financing marigin is at 35% as of March 2024. The company's revenue has literally doubled from the levels in March 2019 to March 2024.

The company's borrowings through bonds have increased by 212% on a Y-o-Y basis. But since it is a NBFC, the only way through which it can finance is by borrowing from financial institutions or through bonds[including debenture]. 

Further we should note that, the company was upgraded to 'AAA/Stable' by ICRA in 2023. 

Conclusion:

Overall the company has a strong fundamentals. The company's share holding pattern is divided as 75% promoters and 25% others. Out of this 25%, 21.33% is held by resident individuals, 0.44% by non resident individuals and the remaining 3.23% is with other institutional investors and mutual funds. 

So in my opinion, as 21.33% is with individuals, the stock tend to be more volatile. Its RSI is at 66.6, it shows that the shares are not at overbought region but still there might be mild corrections to the stock price. So investors and traders should be very careful in trading the company's stocks or while holding it for a short term. So, the company is only for long-term investors who can wait for 3 to 4 years. 

But when it comes to financials, the company has performed well in my view. Even the company has tried well to increase its loan book. Further, as the industry in which it operates grow, the company also has the potential to grow. 

I request readers to do their own research before investing in any stocks and kindly donot consider this blog article to take buy or sell decision of stocks. It is better to consult a SEBI registered advisor for selecting the best stocks to invest in.