Why IREDA Share Price is Rising

The renewable energy sector in India is growing rapidly. This is driven by strong government policies and the global push for sustainability. India is becoming a global leader in clean energy initiatives.

The Indian Renewable Energy Development Agency (IREDA) plays a crucial role in this growth. It is a government-run financial institution that funds renewable energy and energy efficiency projects. By supporting green energy development, IREDA is pivotal in achieving India's renewable energy goals.

IREDA's share price has been on an upward trend after its strong Q2 results.

The company reported a net profit of Rs 3.9 billion (bn) for the Q2 FY25. This is a 36% increase compared to Rs 2.9 bn in the same period last year. Revenue from operations also rose by 38% to Rs 16.3 bn in Q2FY25, compared to Rs 11.8 bn in Q2FY24.

The company has gained significant investor attention recently. This is part of a broader rally in PSU stocks, including IREDA.

Let's explore the key factors driving this surge in IREDA's share price.

#1 Election Results

The BJP-led Mahayuti alliance's resounding victory in the Maharashtra Assembly elections, announced on 23 November 2024, has sparked a rally in PSU stocks.

Winning 233 out of 288 seats, the alliance secured a decisive mandate that aligns the state government with the central government.

This outcome has significantly boosted investor confidence, particularly in government-backed enterprises such as IREDA.

Industry experts point out that the political alignment between the state and central governments is expected to expedite infrastructure projects and resolve long-standing governance challenges.

The market views this as a positive signal, with increased investments anticipated in energy, transportation, and other key sectors. This optimism is a key factor driving the upward trajectory of PSU stocks.

IREDA, a major player in financing renewable energy projects, is reaping the benefits of this renewed interest. As India prioritises infrastructure and energy expansion, the company's strong fundamentals and role in green energy make it a standout performer.

The Maharashtra election results have reinforced market confidence in PSUs, and IREDA's growth prospects align perfectly with the infrastructure push expected under the new political scenario.

#2 Attractive Valuations

IREDA share price reached a record high of Rs 310 per share in July 2024, almost 10x its IPO price of Rs 32 per share within a year. This rapid climb made the stock appear expensive, raising concerns about overvaluation. Investors became cautious as stretched valuations often lead to corrections.

Following the peak, broader market sentiment and concerns over its high valuation led to a pullback. With a current PE ratio of 36.9, the stock is now viewed by the market as better valued, sparking renewed interest among investors.

What makes IREDA particularly attractive now is its significant growth potential. The renewable energy sector in India is expanding rapidly, and IREDA is at the forefront, financing critical projects in this space.

The company's strong position in a booming industry offers promising opportunities for long-term growth. This optimism is driving the stock's recovery.

What Next?

IREDA has outlined a strong growth strategy to expand its role in the country's energy transition, making it an increasingly attractive investment option.

The company is focusing on diversifying its portfolio by exploring newer technologies such as green hydrogen, offshore wind, and pumped hydro storage, in addition to its existing solar and hydro investments.

IREDA plans to grow its loan book from Rs 596.5 bn at the end of FY24 to over Rs 850 bn by the end of FY25. This represents a significant expansion, supported by its robust 24% compound annual growth rate (CAGR) over the past four years.

To achieve these targets, the company is planning to raise Rs 300 bn in FY25 through debt and equity. It has also approved the proposal to raise up to Rs 4.5 bn through a follow-on public offer (FPO), qualified institutional placement (QIP), rights issue, preferential issue, or any other permissible mode.

The company is also working to strengthen its financial position by leveraging its private sector exposure, which currently accounts for 76% of its loan book.

By maintaining its leadership in renewable energy financing and adapting to emerging opportunities, the company is expected to sustain its growth trajectory, making it a key player in India's renewable energy revolution.

How IREDA Share Price has Performed Recently

In the past five days, IREDA share price rallied 4.7%. In the last month it is down marginally.

In 2024, so far its share price it surged 95.2% and in the past year it rallied 240.4%.

The stock touched its 52-week high of Rs 310 on 15 July 2024 and a 52-week low of Rs 60.6 on 30 November 2023.

About IREDA

Indian Renewable Energy Development Agency, founded in March 1987, is a Navratna 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 and its latest quarterly results.

Happy Investing.

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