State-owned Indian Renewable Energy Development Agency (IREDA) is expected to debut with around 30 premium on November 29. This means the likely listing price may be around Rs 42 against the issue price of Rs 32 per share.
Experts attributed this strong listing premium to the healthy IPO subscription numbers, increasing growth momentum in the renewable energy sector and so with power financing NBFCs, and healthy financial performance with better asset quality numbers than peers and fastest loan growth amongst peers.
This would be first government company listing after Life Insurance Corporation of India in May 2022, while it would also be the first amongst the five IPOs closed last week.
The maiden public issue of the financial institution has seen a strong 38.8 times subscription during November 21-23, with qualified institutional buyers picking 104.57 times the allotted quota, and high networth individuals 24.16 times. Retail investors bought 7.73 times the portion set aside for them and employees 9.8 times.
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"We expect the IPO to list at a premium of around 35 percent to the issue price of Rs 32 per share," Shreyansh Shah, Research Analyst at StoxBox said.
Considering 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, Shreyansh is positive on IREDA.
Additionally, it has the best asset quality amongst peers, with its gross non-performing asset (NPA) ratio at 3.13 percent at the end of September 2023, compared to 3.14 percent for REC and 3.67 percent for PFC.
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The state-run Mini Ratna non-banking financial company is available at a price-to-book-value of 1.2x, which experts feel is at a discount to the average of peers. The market capitalisation at the issue price stands at around Rs 8,600 crore.
Its IPO shares traded at around 31 percent premium over the issue price in the grey market, an unofficial market for trading in IPO shares till the listing, analysts on anonymity said. Before the issue opening on November 21, the grey market premium was around 25 percent.
"Considering the high subscription demand and optimistic market mood, a healthy 25 percent and above listing gain can be assumed," Prashanth Tapse, research analyst, senior VP research at Mehta Equities said.
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He believes the listing premium is justified on the back of the company being tagged as a leading PSU player in renewable energy financing and advisory services and a possible upgradation from a Mini Ratna to a Navratna company in the near future which increases financial autonomy, allowing it to accelerate faster in the competition.
Shivani Nyati, Head of Wealth at Swastika Investmart also feels IREDA is likely to generate decent listing gains. "The IPO was priced fairly, reflecting the company's strong fundamentals and growth potential."
The leading non-banking financial institution (NBFI) dedicated to financing renewable energy projects has recorded healthy growth in its gross loan portfolio at a CAGR of 30 percent during FY21-FY23 and profit at a CAGR of 58 percent during the same period.
The cost of funds for IREDA stood at 3.8 percent as of the July-September FY24 quarter, which is lower than peers REC and PFC having 7.2 percent and 7.4 percent, respectively.
The lender has raised Rs 2,150.21 crore by issuing 67.19 crore equity shares via IPO comprising a fresh issue of shares worth Rs 1,290.13 crore) and an offer-for-sale of shares worth Rs 860 crore.
IREDA is going to utilise the net fresh issue proceeds mainly for augmenting its Tier-I capital base to meet future capital requirements and onward lending.
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