IREDA IPO: 10 things to know before subscribing to Rs 2,150 crore issue

IREDA IPO will open for subscription on November 21 and close on November 23

Indian Renewable Energy Development Agency (IREDA) IPO is set to open on November 21. The company plans to raise Rs 2,150.21 crore through a fresh issue of 40.31 crore shares and an offer-for-sale of 26.87 crore shares. This is the first IPO by a government-run company since LIC hit the market in May last year.

Here are 10 key things to know before subscribing to the offer:

1) IPO Dates

The IPO will open for subscription on November 21, 2023, and close on November 23, 2023.

2) Price Band

The price band for the issue has been fixed at Rs 30-32 per share.

3) Offer Details

The company plans to raise Rs 2,150.21 crore via IPO. The offer consists of a fresh issue of 40.31 crore shares worth Rs 1,290.13 crore and an offer-for-sale of 26.87 crore shares worth Rs 860.08 crore. On the upper price band, the firm is valued at Rs 8,600 crore. Currently, the government holds a 100 percent stake in the firm. The anchor book will open for a day on November 20.

4) Objectives of Issue

IREDA will use the net proceeds to augment the capital base to meet future capital requirements and onward lending. The company expects to receive the benefits of listing the equity shares on the stock exchanges.

Also Read: IREDA IPO opens on November 21; details here

5) Lot Size

Investors can bid for a minimum of 460 equity shares and multiples of 460 after that. Hence the minimum investment by retail investors would be Rs 13,800 (460 (Lot size) x 30 (lower price band)). At the upper end, the bidding amount will increase to Rs 14,720.

6) Company Profile

IREDA is a wholly owned Government of India enterprise under the administrative control of the Ministry of New and Renewable Energy. The company has 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 financial products and related services, from project conceptualisation to post-commissioning, for RE projects and other value chain activities, such as equipment manufacturing and transmission. IREDA is a Mini Ratna (Category - I) government enterprise.

7) Financials

IREDA recorded a 58 percent CAGR growth in net profit during FY21-FY23. The capital-to-risk weighted asset ratio (CRAR)  was 21.22 percent as of March 31, 2022, 18.82 percent as of March 31, 2023, and 20.92 percent as of September 30, 2023. Total revenue rose 21.7 percent to Rs 3,481.9 crore in FY23 from Rs 2,859.9 crore in FY22. Profit after tax grew 36.4 percent to Rs 864.62 crore from Rs 633.52 crore in the same period. Profit came in at Rs 294.6 crore in Q1FY24.

8) Lead Managers

The book-running lead managers to the issue are IDBI Capital Market Services, BoB Capital Markets and SBI Capital Markets while Link Intime India is the registrar.

Also Read: Tata Technologies IPO: 10 things to know before subscribing to Rs 3,042 crore issue

9) Risks

(i) The company’s business depends on interest income from the loans disbursed and the interest rates at which it borrows from banks or financial institutions. Interest rates are highly sensitive to many factors, including the monetary policies of the RBI, and domestic and international economic and political conditions. An increase in the cost of funds may lead to a reduction in net interest margins. Interest income as a percentage of total income in FY23 stood at 98.66 percent and the net interest margin was at 3.32 percent.

(ii) The company’s credit ratings have been downgraded in the past. Any future downgrade could adversely affect the business.

(iii) The company had negative cash flows from operations in the past and there is no assurance that such negative cash flows from operations shall not recur in the future. Negative cash flows over extended periods, or significant negative cash flows in the short term, could materially impact the company’s ability to operate business and implement growth plans.

(iv) The business and financial performance could suffer if the company is unable to effectively manage the quality of the growing asset portfolio and control the level of the non-performing assets (NPAs).

10) Listing Date

The trading of IREDA shares on the bourses will commence with effect from December 1, as per the IPO schedule.