IREDA's Rs 2,150-Crore IPO Opens For Subscription: Should You Invest Or Not?
It plans to raise Rs 2,150 crore and has fixed its price band in the range of Rs 30–32 per equity share.
The Indian Renewable Energy Development Agency Ltd.'s maiden public issue will open on Tuesday for subscription and close a day later.
The company plans to raise Rs 2,150 crore and has fixed its price band in the range of Rs 30–32 per equity share for its initial public offering, which is a combination of fresh and offer-for-sale issue.
It will not receive any funds from the OFS portion. However, the fresh issue from the net proceeds will be used to augment the capital base of the company.
IREDA is a financial institution in the business of developing and extending assistance for new and renewable energy projects, and energy efficiency and conservation projects.
The Union government, which is a promoter in the firm, is participating in the OFS. After the issue, its stake will decline to 75% from 100%, while the public stake will increase from nil to 25%.
How Is The IPO Valued?
Looking at the valuation at the upper price band, the public issue presents an implied market capitalisation of Rs 8,601 crore, with a price-to-earnings ratio of 8.4 times.
To Invest Or Not?
It has a price-to-book value of 1 times and 1.1 times based on H1 FY24 book value at the lower and upper price band, respectively, on post-issue capital, according to analysts at SBI Securities.
The government's increased focus on renewable energy—aiming for 50% of energy needs to be met by renewables by 2030—serves as a pivotal driver for the sector and the company is poised to capitalise on this opportunity, the brokerage said.
With loan assets of around Rs 47,075 crore, IREDA is the largest pure-play green financing NBFC in India, according to Choice Equity Broking Pvt.
At a higher price band, IREDA is demanding a trailing 12-month P/B multiple of 1.2 times, which is at a discount to the peer average, it said. "Thus, we assign a 'subscribe' rating for the issue."
On the financial front, the company reported a turnover of Rs 3,482 crore in the last fiscal from Rs 2,860 crore in FY22. Its net profit rose to Rs 865 crore from Rs 634 crore during the period.
IREDA has posted healthy profitability over the past couple of years, strong growth outlook and experienced management team, according to Reliance Securities, which has also recommended a 'subscribe' tag to the issue.