The IREDA IPO, valued at Rs 2,150.21 crores, comprises a combination of a fresh issue of 40.32 crore shares amounting to Rs 1,290.13 crores and an offer for sale of 26.88 crore shares totaling Rs 860.08 crores.

Bidding for the IREDA IPO commenced on November 21, 2023, and concluded on November 23, 2023. The allotment of shares was finalized on Friday, November 24, 2023, with listing on the BSE and NSE occurring on November 29, 2023.

The IPO price band for IREDA was set between ₹30 to ₹32 per share, with a minimum lot size of 460 shares per application. Retail investors were required to invest a minimum of ₹14,720. Additionally, the minimum lot size investment for sNII was 14 lots (6,440 shares), amounting to ₹206,080, while for bNII, it was 68 lots (31,280 shares), totaling ₹1,000,960.

Idbi Capital Market Services Limited, Bob Capital Markets Limited, and SBI Capital Markets Limited acted as the book running lead managers for the IREDA IPO, with Link Intime India Private Ltd serving as the registrar for the issue.

Objective of IPO.

The issue is of total 671,941,177 Equity Shares, out of which 268,776,471 Equity Shares is completely “offer for sale” and rest 403,164,706 Equity Shares are “fresh issue.”

The company proposes to utilize Fresh Issue towards augmenting its capital base to meet future capital requirements and onward lending.

The MOA of the company enables them to undertake existing business activities or the activities proposed to be funded from the Net Proceeds.

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About IREDA Limited

IREDA, a wholly owned Government of India enterprise under the control of the Ministry of New and Renewable Energy. It is registered with the Reserve Bank of India as a Systemically Important Non-Deposit-taking Non-Banking Finance Company, with Infrastructure Finance Company (“IFC”) status.

A financial institution with over 36 years of experience in the business of promoting, developing, and extending financial assistance for new and renewable energy (“RE”) projects, and energy efficiency and conservation (“EEC”) projects. It provides a comprehensive range of financial products and related services, from project conceptualization to post-commissioning, for RE projects and other value chain activities, such as equipment manufacturing and transmission through a comprehensive suite of financial products and services including various fund-based and non-fund-based products.

It has financed projects across multiple RE sectors such as solar power, wind power, hydro power, transmission, biomass including bagasse and industrial co-generation, waste-to-energy, ethanol, compressed biogas, hybrid RE, EEC and green-mobility. Offering financial products and schemes for new and emerging RE technologies such as, biofuel, green hydrogen and its derivatives, battery energy storage systems, fuel cells, and hybrid RE projects.

Competitors: Power Finance Corporation Limited, REC Limited, India Infradebt Limited, Tata Cleantech Capital Limited, and PTC India Financial Services Limited.

Wind

India is home to gross wind power potential of 302 GW at 100 metres and 696 GW at 120 metres above ground level. Further, the potential for offshore wind energy is estimated to be 174 GW (technical resources) across fixed bottom and floating potential mainly off the coast of Gujarat and Tamil Nadu. 

Solar

India’s solar energy potential is appr. 5,000 trillion kWh per year energy incident over India’s geographical area per year. Further, solar PV power can effectively be harnessed, providing huge scalability in India and at the same time, has the ability to generate power on a distributed basis and enables rapid capacity addition with short lead times.

Hydro

Hydro power projects are classified as large and small hydro projects based on their sizes and in India, hydro power plants of 25MW or below capacity are classified as small hydro and comes within the purview of MNRE. 

Energy Efficiency and Conservation

Energy efficiency is when specific energy consumption (units of energy consumed per unit of output) of a device or equipment is improved by changing the technology deployed. For energy conservation, the main technology of the device or equipment remain unchanged; however, the unproductive use of energy is minimized.

Biomass and Waste-to-energy

Biomass is the process by which agricultural waste is used for power generation or for biogas generation, where biomass includes rice husk, straw, cotton stalk, coconut shells, soya husk, de-oiled cakes, coffee waste, jute wastes, groundnut shells, saw dust, among others.

Ethanol

The GoI has advanced the target date for ethanol blended petrol from 2030 to 2025 for 20% ethanol blending to decrease the oil import burden. A successful 20% ethanol blending program can cut down on India’s oil import bill and ethanol is also a less polluting fuel, and offers equivalent efficiency at lower cost 240 than petrol.

Emerging Technologies

Large scale integration of RE beyond the scope of meeting India’s basic power sector requirement demands integration of clean energy usage in the industry and transport sector, necessitating the use of synthetic fuels, which are carbon neutral alternatives of conventional fuels. The GoI has also announced National Green Hydrogen Mission with an objective to make India a global hub for production, usage and export of green hydrogen and its derivatives and approved an outlay of ₹190 billion to help achieve an annual production target of 5 MMT by 2030 for facilitating the net-zero target.

Transmission

A transmission line is used for the transmission of electrical power from generating substation to the various distribution units. With the current growth trajectory of RE in last few years, coupled with GoI target of integrating 500 GW non-fossil based installed capacity by 2030, transmission planning has become even more essential to integrate and evacuate RE power.

Risk Analysis.

1. Volatility in interest rates could adversely affect business, hedging instruments, net interest income and net interest margin. Lack of proper management of NPAs.
2. Business is subject to periodic inspections by the RBI.
3. Credit ratings have been downgraded in the past.
4. Certain DISCOMs that purchase electricity from its borrowers and certain states have sought revision in the terms of their existing PPAs. A downward revision in the tariffs could negatively affect the cash flows and financial conditions of borrowers and may affect their repayment capabilities.
5. business is entirely concentrated in, and dependent on, the Indian RE sector. Even within the Indian RE sector, 81.49% of Term Loans Outstanding as of September 30, 2023 were concentrated within four sectors. Whereas the Top 20 borrowers hold 40% of portfolio. And Rajasthan, Karnataka, Andhra Pradesh, Gujarat, Maharashtra holds 60% of the loans.
6. A significant portion of NPAs is concentrated in loans to sectors such as biomass power and cogeneration, hydro power and wind power.
7. Since the company is dealing in highly competitive and seasonal business, it may fail to obtain certain regulatory approvals in a timely manner or at all, or to comply with the terms and conditions of existing regulatory approvals and licenses.
8. The company is exposed to fluctuations in foreign exchange rates, which in turn could adversely affect its results.
9. It offers innovative financing schemes to adapt to evolving business needs, some of which require them to rely on projections regarding prospective income. There can be no assurance that they will be able to recover amounts due to company under such arrangements if borrowers are unable to generate adequate revenues.
10. Borrowers’ insurance of assets may not be adequate to protect them against all potential losses.