Moody's assigns Baa3 issuer rating to IREDA

Moody's Investors Service has assigned a Baa3 local and foreign currency issuer rating with stable outlook to state-run IREDA.

The Baa3 rating of IREDA takes into consideration its standalone credit profile and the high linkage with the Government of India, resulting in a very high dependence on government and a high probability of government support, if needed, Moody's said in statement today.

The standalone credit profile also takes into consideration IREDA's role as the nodal agency for implementing government's renewable energy initiatives as well as continued support from government.

Such government support came in the form of regular equity infusions until financial year 2014 as well as guarantees for IREDA's borrowings from multilateral agencies (which accounted for around 55 per cent of IREDA's total borrowings as of March 2016) and access to tax-free bonds, which are a low-cost funding source.

The standalone strength of IREDA is supported by its stable funding and liquidity profile with long-tenure borrowings from multilateral agencies, which have been guaranteed by the government.

Around 80 per cent of the company's liabilities will mature only after five years, and close to 70 per cent of its domestic borrowings will mature only in or after 2025, it said.

IREDA benefits from a strong capitalisation profile which Moody's expects will remain broadly stable over the next few months. Its tangible common equity/total managed assets ratio stood at 17.4 per cent at the end of March 2016, compared to an average of 21 per cent over the past five years, it added.