IREDA IPO opens: GMP, Subscription, Key details – 10 things to know

Indian Renewable Energy Development Agency IPO (IREDA IPO) has just opened for subscription on 21st November 2023 and will be open till 23rd November 2023. Here is what investors need to know about the IPO of Indian Renewable Energy Development Agency Ltd (IREDA).

1. What is the business model of IREDA?

Indian Renewable Energy Development Agency Ltd (IREDA) was incorporated in 1987 and is 100% owned by the government of India. It is a lending institution that gives loans for renewable energy projects in India. IREDA extends financial assistance for new and renewable energy projects, as well as energy efficiency and conservation projects. In addition, due to its deep insights into the renewable energy space, IREDA also extends mentoring and advisory services to its key customers in the renewable energy space. As an institution, IREDA is committed to help India transition into a greener and sustainable future.

2. What are the key dates pertaining to the issue?

IREDA IPO opened on 21st November 2023 and closes for subscription on 23rd November 2023 (both days inclusive). The basis of allotment will be finalized on 29th November 2023 and refunds will be initiated on 30th November 2023. The demat credits will happen on 01st December 2023 and the stock will list on the BSE and the NSE on 04th December 2023.

3. What is the size of the IREDA IPO and the price of the IPO?

The price band for the IPO has been fixed in the range of ₹30 to ₹32 per share. It is a combination of fresh issue and an offer for sale. The fresh issue is for 40,31,64,706 shares worth ₹1,290 crore at the upper price band of ₹32 per share. The offer for sale (OFS) is for sale of 26,87,76,471 shares worth ₹860 crore at the upper price band of ₹32 per share. Hence, the total IPO size comprises the issue and sale of 67,19,41,177 shares worth Rs2,150 crore at the upper price band of ₹32 per share. Final price has to be discovered post IPO.

Check IREDA IPO GMP

4. What is the minimum number of shares to apply for in the IPO?

That will depend on which category of IPO investor you are applying under. Remember that the Lot size is the minimum number of shares that the investor has to apply for. In the case of the IREDA IPO, the minimum lot size is 460 shares with indicative value of ₹14,720. The table below captures the minimum and maximum lots sizes for all categories.

There is no upper limit for B-HNI category and for the QIBs (qualified institutional buyer).

5. Is IREDA a profit making company?

The table below captures the key financials of the company for last 3 financial years.

Not only is IREDA a profit making company, its latest full year net profit margins are above 24% while the ROE is above 14.5% for the latest year.

6. How many shares are available for Retail and QIBs to apply in the IPO?

The company has reserved 50% of net offer for qualified institutional buyers (QIBs), 35% for retail investors and residual 15% for the HNI / NII investors. Net offer here refers to shares left after quota allocated to employees.

The anchor portion, will be carved out of the QIB portion. Once the anchor allocation is completed on 21st November late evening, the number of shares allocated to anchors will be deducted from QIB quota above and only balance QIB quota will be offered to public.

7. Can investors for IPO apply through trading account and internet banking account?

Investors can apply either through their existing trading account (with the broker) or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

8. What is the subscription status of the IREA IPO at the end of Day-1?

Here is how the subscription stands as per the BSE at 16.30 pm on 21st November 2023.

QIB Portion – 1.34 times subscribed

HNI / NII Portion – 2.46 times subscribed

Retail Portion – 1.90 times subscribed

Employee Portion – 2.04 times

Overall IPO subscription – 1.86 times

Please not that this is not the final data for 21-November and then there are 2 more days left for the IPO.

9. Based on the financials, can I invest in the IREDA IPO?

Let us be clear that a decision to invest in an IPO or any other investment should be based on your goals and after consulting your financial advisor. Here is what we read from the financials. In last 3 years, revenue growth has been steady and also growing. The focus on renewable energy and the comfortable level of NPAs have helped IREDA. For a lender, it is the net profit margin that really matters and that has been over 20%. This is on the back of strong growth in NII and robust NIMs. Return on assets (ROA) is consistently above 1.5% and the ROE has also been attractive at above 14.5%. Overall financials look to be sound.

10. Should I look at any qualitative valuation factors to invest in the IREDA IPO?

Let us share a few interesting thoughts here. Let us turn to the valuations part. On latest year standalone EPS of ͅ73.78, the stock trades at  P/E ratio of 8.5X. That is an attractive play in comparison to the peer group. Based on weighted average EPS of three years, the P/E is still more attractive at 6X. Positive ratios should help sustain valuations and also improve over time. On the qualitative side, IREDA brings deep insights into renewable energy space in India, something inevitable to meet India’s net zero plans. IREDA looks like solid stock with something for shareholders on the table and at reasonable valuations. Of course, you have to consult your financial advisor and take a long term view as an equity investor.