Can IREDA Continue to grow its Revenue at 44% CAGR? Trade Brains Trade Brains

Today, electric vehicles are booming as the world is look to transition towards a cleaner and greener environment. This energy is obtained from renewable sources used in water heating, cooling, transportation, electricity for industries, and operating appliances. This renewable energy is friendly to nature and does not produce greenhouse gases like carbon dioxide and chlorofluorocarbons.

In the 21st century, increased energy demand is unavoidable. India is diversifying its energy supply by depending on renewable energy and reducing its dependence on imported fuels. One such business that encourages and provides financial assistance for projects and energy conservation for companies and manufacturers is the Indian Renewable Energy Development Agency Limited. This article examines the company overview, industry outlook, and financial highlights.

Industry Overview

Indian non-banking financial services are the third largest in the world after the US and the UK. The sector is growing rapidly. The RBI Governor predicts India’s growth rate will hit 7.2% this year, which is expected to boost credit demand and increase profits for non-banking financial companies, even with some risks from rising credit costs.

By March 2024, both commercial banks and NBFCs had gross non-performing assets (GNPAs) below 3% of their total loans, with NBFCs at 2.5%. From September 2022 to September 2023, NBFCs increased their gross advances by 20.8%, especially in personal and agricultural loans. Their GNPA ratio improved to 4.6% by September 2023 due to partnerships with banks and increased foreign investment.

NBFCs are in strong financial shape, with a capital adequacy ratio (CRAR) of 26.6% as of March 2024, well above the required level. The NBFC sector continues to show solid returns and strong profit margins while improving cost efficiency. Their liquidity is stable, with short-term liabilities below 25% and long-term assets making up most of their holdings. However, their share capital, reserves, and surplus have decreased, making up 28.3% of their total liabilities by March 2024. However, with government focus, the NBFC sector can sustain long-term growth and expansion.

Company Overview Of IREDA

IREDA, established in 1987, is the largest pure-play green non-banking financial company with over 37 years of experience in financing the renewable energy sector. It is a fully owned subsidiary of IFSC Gift City and was notified as a public financial institution in 1995.

The main objectives of IREDA are to finance renewable energy projects, support green power capacity, finance the setting up of solar manufacturing units, and encourage the use of renewable energy to foster sustainable growth. The company motto is “Energy for Ever.”

IREDA is administered by the Ministry of New and Renewable Energy and is classified as a mini-Ratna. In 2024, IREDA was officially granted Navratna status, enhancing its financial and operational autonomy, streamlining decision-making, and improving responsiveness to market changes.

Financial Products and Services of IREDA

The Indian renewable energy development agency has a presence across renewable energy sectors with a comprehensive suit. 

Traditional Renewable Energy Technologies: The company focuses on solar, hydro, transmission, biomass cogeneration, wind, energy efficiency and conservation, ethanol, and waste-to-energy.

Emerging technologies: The company focuses on developing battery storage systems, electric vehicle charging stations, green hydrogen, pumped storage hydro, fuel cells, and RE component manufacturing.

Conceptual Commissioning: The company provides project-term loans, refinancing of loans, lines of credit to NBFCs for on-lending, top-up loans, loan syndication, loans against securitization of future cashflows, and payment on order instruments.

Asset quality

Over the last 5 years, gross NPA has gone down ₹2,373 crores in FY20 to ₹1,411 crores in FY24, while net NPA has gone down from ₹1,637 crores in FY20 to ₹581 crores in FY24. This indicates IREDA has fewer loans or assets with better financial health and a lower risk of default by reducing potential losses from bad loans, respectively. 

Financial Highlights Of IREDA

In FY2024, Indian Renewable Energy Development Agency Limited increased its interest income by 29%, reaching ₹1,658.3 crores compared to ₹1,285.3 crores in FY23. Over the past four years, from FY20 to FY24, the company achieved a solidified net interest income CAGR of 20.47%. In FY24, IREDA’s net profits rose by 45%, reaching ₹1,252 crores compared to ₹865 crores in FY23. 

The reason behind the IREDA performance was strong business updates. The company has recorded the highest-ever loan amount sanctioned at ₹37,354 crores and the loan disbursed in this period was ₹25,089 crores. IREDA’s loan book achieved a record rise of 26.71% and recently announced plans to raise funds to ₹24,200 crore. The more loans IREDA disburses, the more revenue is generated. IREDA maintained strong financial metrics in FY24, with a return on equity of 14.62% and a return on assets of 2%. 

Future Outlook Of IREDA

The company committed to renewable power capacity development by 2030 with 11,000+ gigawatts.

The India Renewable Energy Development Agency has pledged to triple its renewable capacity by 2030 at COP28 in more than 100 countries.

The company is expecting a required investment in energy in the transition of technologies by 2030 of US $35 trillion.

The Indian Renewable Energy Development Agency has chosen to start non-fossil fuel-based energy by 2030 with 500 gigawatts.

IREDA is supporting an outlay of ₹500 crores under the Electric Mobility Promotion Scheme for 3,72,215 electric vehicle expansions in 2024 for 4 months from April 24 to July 24.

The company raised a viability gap funding scheme for offshore wind energy projects worth ₹7,453 crore.

In India in June 2024, the renewable energy installed capacity totaled 195 GW. It includes solar PV, wind, hydropower, and bioenergy. 

Borrowing Overview Of IREDA

As of June 2024, the IREDA outstanding domestic borrowings were at ₹53,095 crores. The borrowings have been divided into two divisions:

Bonds: The bonds were increased by 86% to reach ₹20,895 crores in Q1FY25 compared to ₹11,238 crores in Q1FY24 from domestic borrowings and in foreign borrowings, the hedged borrowings declined by 19% to reach ₹6,641 crores in Q1FY25 compared to ₹7,917 crores in Q1FY24.

Bank Loans: The bank loans increased by 24.5% to reach ₹23,538 crores in Q1FY25 compared to ₹18,906 crores in Q1FY24 from domestic borrowings and in foreign borrowings, the un-hedged borrowings declined by 7.4% to reach ₹2,021 crores in Q1FY25 compared to ₹1,881 crores in Q1FY24.

The company raised a total of ₹5,373 crores for Q1 FY25. Bonds are issued at ₹2,500 crores, bank loans are issued at ₹2,640 crores, and international borrowings are issued at ₹233 crores. 

Lending Overview Of IREDA

The outstanding loans by the Indian Renewable Energy Development Agency are poured into different sectors.  Total lending funds climbed by 34% to reach ₹63,207 crores in Q1 FY25, compared to ₹47,207 crores in Q1 FY24. The lending funds flowed to the private sector with  ₹47,738 crores and the public sector funds flowed with ₹15,469 crores in Q1FY25  

The sanctioned amount climbed by 387% to reach ₹9,210 crores in Q1FY25 compared to ₹1,892 crores in Q1FY24, while the disbursed amount was increased by 68% to reach ₹5,325 crores in Q1FY25 compared to ₹3,174 crores in Q1FY24.

Also read…

Sector-wise split of outstanding loans

State-wise Lending Profile Of IREDA

Financial Key Metrics Of IREDA

Price target from brokers

ICICI Direct: The ICICI DIRECT brokerage assigned a target of ₹ 330 and maintained a ‘Buy’ rating on the stock. The brokerage considered some important drivers to conclude the buy rating. IREDA gave strong quarter results that grew by 34% YoY and 6% QoQ growth in AUM. NII grew by 38% YoY and 5% QoQ. Profit after tax increased by 30% YoY and 13.6% QoQ.

Operational performance remained balanced, with PPoP rising by 30% YoY. Asset quality improved by 17 basis points QoQ and declined in GNPA at 2.19% and 4 basis points QoQ declined in NNPA at 0.95%.

Conclusion

As we near the end of the article, we look in brief: The Indian renewable energy development agency has shown vigorous performance in the past years, and the gross NPA and net NPA have gradually decreased over the years, which converted their losses into gains. The lending has increased to ₹63,207 crores in Q1 FY25, which is 38% higher compared to ₹47,207 crores in Q1 FY24.

The bonds increased by 86% to reach ₹20,895 crores and the bank loans increased by 24.5% to reach ₹23,538 crores. The ROE grew by 12.3% over the last 5 years and the ROA grew by 1.5%. With these strong financial operations, the company will continue its momentum.

And the government has also focused on the renewable sector, which will help in the long term in terms of growth and expansion. What do you think about the future of the Indian renewable energy development agency and its industry? Let us know your views in the comments section below.

Written by Shashi

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Today, electric vehicles are booming as the world is look to transition towards a cleaner and greener environment. This energy is obtained from renewable sources used in water heating, cooling, transportation, electricity for industries, and operating appliances. This renewable energy is friendly to nature and does not produce greenhouse gases like carbon dioxide and chlorofluorocarbons.
The post Can IREDA Continue to grow its Revenue at 44% CAGR? appeared first on Trade Brains.   Read MoreCase Study, Financials, Market, ireda, IREDA future plans, IREDA share price, IREDA share price target 2024, stock market Trade Brains