IREDA, India’s leading green financing NBFC, saw its stock price jump almost 7% today, reaching ₹275 per share, breaking a three-day losing streak. However, it is still 13.22% below its all-time high of ₹310.
Recent Sell-Off and Recovery
The recent sell-off was due to profit-taking and a downgrade by Phillip Capital after IREDA’s Q1 FY25 earnings report. Phillip Capital predicts strong loan growth for IREDA at a CAGR of 25% from FY24 to FY26, driven by the rising demand for renewable energy. However, they noted that earnings growth might lag due to margin pressures.
Earnings and Growth Projections
Phillip Capital expects IREDA’s earnings to grow by 18% in FY25 and 20% in FY26, with a return on equity of 16%. Currently, the stock trades at 7.6x and 6.5x FY25 and FY26 adjusted book value per share (ABVPS) of ₹35 and ₹42, respectively.
Concerns and Ratings
Concerns include high exposure to the private sector and significant vulnerable assets, potentially affecting credit costs. Phillip Capital projects a decline in return on assets (ROA) to 2.2% and 2.1% in FY25 and FY26, respectively, from 2.3% in FY24. They believe the recent stock rally was due to passive flows rather than strong fundamentals, maintaining a ‘sell’ rating with a revised target of ₹130, valuing the company at 3x FY26 ABVPS of ₹42.
Q1 Performance
For the June quarter, IREDA reported a 30% increase in net profit to ₹383 crore. Total revenue from operations rose 32% to ₹1,501 crore, compared to ₹1,143.50 crore last year. Loan sanctions surged by over 380% during the quarter.
Investor Interest
Retail investor interest has increased, with the number of small shareholders rising from 21.23 lakh in the March quarter to 22.15 lakh by June.
About IREDA
IREDA, established in 1987, is a non-banking financial company (NBFC) offering financing solutions for renewable energy projects. It is a government-owned enterprise operating under the Ministry of New and Renewable Energy (MNRE). IREDA focuses exclusively on the renewable energy sector, unlike the Power Finance Corporation, which also funds infrastructure, roads, and mining.
Stock Performance
IREDA’s shares started trading on Indian stock exchanges on November 29, 2023, at ₹60 per share, significantly above the issue price of ₹32. The current stock price is 760% higher than the IPO price and 360% higher than the listing value.
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