IREDA Plans FPO to Boost Renewable Energy Funding

Tanushree Jaiswal Tanushree Jaiswal

Last Updated: 22nd May 2024 - 03:17 pm

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State-run Indian Renewable Energy Development Agency (IREDA) is contemplating the issuance of a follow-on public offering (FPO) during the current financial year, according to Chairman and Managing Director Pradip Kumar Das' statement on May 21.

The non-banking financial company (NBFC) is planning to launch a follow-on public offer (FPO) to address its capital needs and finance green energy projects. The FPO is expected to launch either in the second half of the current fiscal year or early in FY26, although the specific amount has not been disclosed by Das. The company is also exploring perpetual debt as an additional funding source.

IREDA chairman and managing director (CMD) Pradip Kumar Das announced plans to expand the company's loan book during a press interaction on Tuesday. He indicated that IREDA will seek funding this fiscal year, exploring options such as a follow-on public offering and perpetual debt instruments.

“We feel we would require more equity capital. The project size in green energy is getting bigger, and we intend to support the sector’s growth. For this, we believe an FPO is the route to raise more equity capital," he said, adding that the FPO would require the approval of the Union cabinet.

“We may come back to the market through follow-on public offering. We will be requesting the government of India (for FPO),” Das told reporters in media round table.

Despite two previous failed attempts to go public in 2017 and 2019, IREDA, a recently awarded Navratna company, successfully launched an initial public offering (IPO) in December 2023.

In March, the board of directors at IREDA authorized a borrowing plan for up to ₹24,200 crores for the 2025 fiscal year. Das indicated that the company intends to launch an FPO (Follow-on Public Offering) since the ₹24,200 crore amount would be insufficient to support IREDA's long-term aspirations.

According to Das, the company plans to launch its FPO either during October-November or in February. However, if the green energy-focused NBFC is unable to launch the FPO in the current fiscal year, it will be launched in the first half of FY26.

IREDA's net worth currently stands at approximately ₹8,600 crore. The company's loan portfolio amounts to approximately ₹59,698 crore. In FY24, IREDA disbursed around ₹25,089 crore, an increase from the ₹21,639 crore disbursed in FY23. The CMD anticipates loan disbursements to exceed ₹30,000 crore in FY25. The company will require additional resources to execute its loan disbursement plan for the current fiscal year.

Following two unsuccessful attempts in 2017 and 2019, IREDA successfully launched its initial public offering (IPO) in December of last year. In April, the company's board of directors authorized a borrowing plan of ₹24,200 crore for the fiscal year 2025. This plan includes a mix of funding sources such as bonds, perpetual debt instruments, term loans, commercial papers, and external commercial borrowings.

IREDA has requested the Centre to include it in the list of companies eligible for capital gains exemption bonds under Section 54EC of the Income Tax Act, 1961, similar to other power sector-focused state-run companies like PFC and REC. The Union Ministry of New and Renewable Energy will also support this inclusion.

This would provide capital gains tax exemption under Section 54EC of the Income Tax Act to investors. REC, National Highway Authority of India, Power Finance Corporation, and Indian Railway Finance Corporation can issue bonds under this mechanism.

Recently, the company set up a wholly-owned subsidiary IREDA Global Green Energy Finance IFSC Ltd, at the International Financial Services Centre (IFSC), GIFT City, Gujarat. Last month it also got the Navratna status.

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