The Indian Renewable Energy Development Agency (IREDA) made a stellar market debut on November 29, listing at Rs 50, a 56 percent premium to the issue price of Rs 32. Several analysts recommend holding the stock for the medium to long term due to the state-run company’s strong fundamentals and growth potential.
The listing was above Street expectations. “We believe post-listing there would be decent demand for the shares, as it had received an overwhelming response from all kinds of investors, especially from long-term funds. IREDA can act as a proxy play for the growth in the Indian renewable energy sector,” said Prashanth Tapse, Research Analyst, Sr VP Research, Mehta Equities.
IREDA raised Rs 2,150.21 crore through the initial public offering.
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Shivani Nyati, Head of Wealth, Swastika Investmart, said the company's long-term prospects appear promising, making it a worthwhile investment for those with a long-term horizon.
“IREDA's strong financial performance and focus on the burgeoning renewable energy sector make it an attractive investment proposition,” Nyati said. The sector is poised for significant growth in the coming years, driven by government initiatives and increasing environmental concerns, she added.
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The offer was subscribed 38.8 times with investors across categories buying a total of 1,827.25 crore equity shares against an IPO size of 47.09 crore shares.
Qualified institutional buyers (QIB) subscribed 104.57 times their quota of shares, high net-worth individuals 24.16 times and retail investors bid 7.73 times their allotted portion.
Power-financing NBFCs are expected to continue this growth momentum and are likely to be driven by increased power demand, rising population, renewable integration, and the country's sustainability goals.
“We are positive for IREDA. Additionally, it has the best asset quality amongst peers, with its GNPA ratio at 3.13 percent at the end of September 2023, compared to 3.14 percent for REC and 3.67 percent for PFC,” said Shreyansh Shah, Research Analyst, StoxBox.
Buy, sell or hold?
Mehta Equities: Hold
Tapse said IREDA gives investors a long-term opportunity to hold and raid the growth in the sector in serves. “Hence recommends all allotted investors ‘hold for the long term’, while those who failed to get allotments can accumulate on every dip for holding it for healthy long-term returns as markets always reward a player who has high visibility and growth potential,” Tapse said.
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StoxBox: Hold
“We believe the company is attractively valued at the current P/BV multiple of 1.2x. We advise investors who have received allotment to hold their shares from a medium to long-term perspective,” said Shah.
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