IREDA shares rally 12% as PSU gets 'Navratna' status; stock up 5x from IPO price

Shares of Indian Renewable Energy Development Agency (IREDA) surged more than 12 per cent during the trading session on Monday after the company was given 'Navratna status' by the government of India on Friday. The company informed about the same through an exchange filing.

This is to inform that Department of Public Enterprises (DPE) vide its letter dated April 26, 2024 has granted the ‘Navratna status’ to Indian Renewable Energy Development Agency Limited (IREDA), said the company in an exchange filing with the bourses.

Following the update shares of IREDA surged 12.45 per cent to Rs 192 on Monday, commanding a total market capitalization of more than Rs 51,000 crore. The scrip had settled at Rs 170.65 in the previous trading session on Friday.

IREDA had launched its IPO in November 2023 and raised a total of Rs 2,150.21 crore via its initial stake sale. The company sold its shares for Rs 32 apiece and the stock has delivered a return of 500 per cent from its issue price so far. The stock was listed at 49.99, a premium of 56 per cent over its issue price and it is currently up 285 per cent from its listing price.

Recently, IREDA reported a net profit of Rs 337.38 crore for the quarter ended on March 31, 2024 up 33.03 per cent on a year-on-year (YoY) basis. The shadow lender had reported a bottomline of  Rs 253.62 crore in the same quarter a year ago.

Net interest income (NII) grew 35.1 per cent to Rs 481.4 crore in the Q4FY24 against Rs 356.4 crore in the corresponding quarter of FY23. NIIs is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors.

Indian Renewable Energy Development Agency, Incorporated in March 1987, is a 'miniratna' public limited government company, administratively controlled by the Ministry of New and Renewable Energy (MNRE). It provides financial assistance and other services to projects related to renewable sources of energy and energy efficiency/conservation.

IREDA to see strong loan growth at a CAGR of 25 per cent over FY24-26 on rising demand for renewable energy. But the earnings growth is not expected to match the loan growth due to pressure on margins. Higher exposure to the private sector and high proportion of the vulnerable portfolio do not provide confidence for low credit costs in the medium term, said Phillip Capital.

"While loan growth is high, return ratios are moderate and there is higher exposure to the private segment – which undermines conviction. We expect ROA to decline to 2.2 per cent and 2.1 per cent in FY25 and FY26, respectively from 2.3 per cent in FY24. We believe the best is already priced into the stock. We maintain 'sell' rating with revised target of Rs 110," it added.

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