Why IREDA Share Price is Falling

Share price of IREDA has seen the best post market debut rally on the bourses, with shares tripling from Rs 32 to Rs 112 in just 10 trading sessions.

The renewable energy player didn't stop there. The stock price surged to Rs 198 in the following sessions.

Experts were convinced that with strong growth prospects in place, the rally could further stretch, and the momentum may continue.

But as they say in life, all good things must come to an end...

IREDA share price has seen a sharp fall in the past few days with the stock locked in lower circuit for consecutive sessions.

Investors who did not book profits when IREDA was at the top have seen their wealth erode by 20% in 5 trading sessions.

The stock, which touched an all-time high of Rs 214 not long ago, is trading at Rs 154 at present.

Let's find out why IREDA share price is falling and what lies ahead.

Profit Booking

Following a sharp rally post listing, IREDA shares have seen a steep fall as investors decided to take some money of the table and book profits in the stock.

IREDA shares have surged post the government's clean energy push in the Union Budget 2024 and several other announcements towards the renewable energy.

So it was only a matter of time before investors took note of the overall volatility in the overall market and book profits in the counters that have given them the max returns.

In fact, not just IREDA but most PSU stocks that saw a sharp rally in quick time have seen a minor correction in recent days.

What Next?

Going forward, IREDA is expected to see some inflows owing to the recent MSCI rejig.

The company has been added to the MSCI Smallcap index in the February review, and the effect may happen post 29 February 2024.

Experts say that IREDA could see US$17 million worth of inflows.

The company recently partnered with Indian Overseas Bank (IOB) to co-finance renewable energy projects in India.

It has also received an approval from Reserve Bank of India (RBI) to set up its wholly-owned subsidiary in the International Financial Services Centre (IFSC) situated in GIFT City, Gujarat.

IREDA has identified 7 strategic segments where it is likely to expand. This is in alignment with the Government of India's focus. These key areas include:

• Green Hydrogen and Derivatives (Including Manufacturing)
• Pumped Hydro Storage Power Plants
• Battery Storage Value Chain (Including Manufacturing, Storage, Recycling)
• Offshore Wind
• Green Energy Corridor
• Rooftop Solar Power
• Green Mobility Value Chain (Fuel Cells, Charging Infrastructure)

Moreover, IREDA is also focused on optimising borrowing costs. It currently enjoys lower cost of borrowing.

Overall, the company has strong growth levers in place, and it has also posted decent numbers in the most recent quarter.

IREDA reported a 67% rise in net profit to Rs 3.4 bn in Q3, led by growth in the loan book and a significant reduction in net non-performing assets (NPAs).

IREDA has a strategic advantage as it's the largest pure-play green financing NBFC in India.

Power Financial NBFCs	Market Share towards Renewables (%)
IREDA	31%
PFC	32%
PFS	1%
REC	19%
TCCL	7%
India Infradebt	9%

Data Source: CareRatings

As India's renewable energy sector grows, IREDA is bound to grow. Companies, big and small, have lined up impressive plans to set up renewable energy capacities.

By 2030, financing requirements for renewable energy sectors such as solar and wind are expected to rise sharply in line with the government's goal of 500 GW of built non-fossil fuel-based electricity capacity.

In its red herring prospectus, the company mentioned that renewable energy targets will need around Rs 30 trillion out of which Rs 12 trillion will be from power financing NBFCs.

We could possibly see a multi-fold growth in IREDA's loan portfolio as all this happens.

How IREDA share price has performed recently

In the past five trading sessions, IREDA share price is down around 20%.

The stock is currently locked in the 5% lower circuit band at Rs 154 against the previous close of Rs 162.

IREDA has a 52-week high of Rs 215 touched on 6 February 2024 and a 52-week low of Rs 50 touched on 29 November 2023.

Since listing, the stock is up over 200% even after the recent fall.

At the current price, IREDA trades at a PE multiple of 47x and a price to book value ratio of 4x.

About IREDA

Indian Renewable Energy Development Agency, founded in March 1987, is a Mini Ratna (Category - I) government firm. It is administratively controlled by the Ministry of New and Renewable Energy (MNRE).

For over 36 years, it has been actively promoting, developing, and extending assistance for new and renewable energy projects, as well as energy efficiency and conservation projects.

The company provides a full variety of financial products and related services for RE projects and other value chain operations, such as equipment manufacturing and transmission, from project conceptualisation to post-commissioning.

To know more, check out IREDA's financial factsheet.

Happy Investing.

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