IREDA Q1FY25 Sees Record Loan Disbursement of ₹25,089 Crore

Company Overview:

Indian Renewable Energy Development Agency Ltd (IREDA) is an Indian public sector company that provides financial backing and additional assistance for projects related to renewable energy sources, energy efficiency, and conservation. Established in 1987, IREDA is a Navratna institution under the administrative jurisdiction of the Ministry of New and Renewable Energy, owned by the Indian government. IREDA was listed on the NSE and BSE following its initial public offering (IPO) in November 2023.

IREDA, a public limited company under government ownership and a non-banking financial institution, is committed to the development, encouragement, and funding of projects related to energy efficiency, conservation, and new and renewable energy sources. The company holds the status of a Mini Ratna (Category I).

Industry Overview & Growth Drivers:

India’s Green Financing Scenario: According to the International Renewable Energy Agency’s (IRENA) 2023 global ranking, India ranks fourth in the world for installed capacity of renewable energy, fourth for installed capacity of wind power, and fifth for installed capacity of solar power.

Bidding activity in other renewable energy sectors also increased in FY24:

• The Government of India secured contracts for approximately 412,000 MTPA of green hydrogen production, with a 30-month timeline for commissioning.
• Production of electrolysers: Under the Strategic Interventions for Green Hydrogen Transition Scheme (Tranche-I), a production capacity of approximately 1,500 MW was granted.
• Solar PV production: Under the Solar PLI Scheme (Tranche II), letters of award were issued for 39,600 MW of fully and partially integrated solar PV module manufacturing plants.
• Battery production: Under the Advanced Cell Chemistry PLI Scheme, a request for proposals was issued for a 10 GWh production capacity, which was later approved in April 2024.

Key Drivers for Growth in Solar and Wind Segments:

• The budget for grid-based solar power projects in 2024–2025 is ₹10,000 crore, compared to ~₹4,757 crore in 2023–24, according to updated estimates.
• In 2024–25, wind power was allocated ~₹930 crore, compared to ~₹916 crore in 2023–24.
• Utility-scale solar and onshore wind: 50 GW of yearly bids for utility-scale solar and onshore wind have been planned, with allocations distributed among SECI, NTPC, NHPC, and SJVN, and a minimum of 10 GW of wind capacity announced for the period of 2023–2028.
• Additionally, 50 solar parks with a combined capacity of more than 37,490 MW have been approved by the MNRE across 12 states, with about 10,401 MW of that power already put into service.

Hydropower: Depending on their scale, hydropower projects are categorized as large or small. In India, hydropower facilities with a capacity of 25 MW or less are classified as small hydro projects and fall under the purview of renewable energy. Following a government notification in 2019, large hydropower projects (>25 MW) have also been classified under renewables.

Important government initiatives promoting growth include:

• Budgetary Focus: Aggregation machinery will help meet the mandate to combine CBG with piped gas and CNG, reducing the cost of LNG imports and enabling greenfield capacity development.
• PLI for Manufacturing of High-Efficiency Solar Modules & Electric-Mobility Promotion Scheme 2024 (EMPS 2024)
• Waiver of Interstate Transmission System (ISTS) charges for solar PV manufacturing capacity
• ₹564.75 crore allocated under the scheme from FY 2023–2024 to FY 2026–2027.

Q1FY25 Quarterly Results:

• The company’s highest-ever disbursement of ~₹25,089 crore in FY24 led to an incremental rise in its loan book to ~₹59,698 crore at the end of FY24.
• Interest on loans increased by 44.84% in FY24 compared to FY23, contributing to the 42.56% increase in total income in FY24 over FY23.
• Finance costs rose by 51.51% over FY23, primarily due to higher borrowing to meet the increasing demand for lending operations.
• Interest expenses on borrowings increased by 70.59% due to additional funding raised through term loans from banks and other financial institutions at attractive domestic market rates.
• Loans increased by 27.14% in FY24, mainly due to an increase in net disbursement.
• The company achieved an all-time high PAT of ~₹1,252.23 crore and increased its net worth to ~₹8,559.43 crore in FY23.
• The company’s capital adequacy is well within RBI guidelines, with a CRAR of 20.11% compared to the minimum allowable floor of 15%.
• The debt-to-equity ratio decreased to 5.80 times in FY24 from 6.77 times in FY23 due to a new stock issue and retained earnings that were greater than the debt increase at the end of the fiscal year.
• Operating profit margin grew by 3.76% in FY24 to 32.92% from 32.69% in FY23, driven by an improvement in net margin due to higher interest income.
• The net profit margin increased from 24.82% in FY23 to 25.22% in FY24, primarily due to a 1.61% increase in the interest income margin.

Sanctions and Disbursements:

• A 14.63% rise was observed over the ~₹32,586.60 crore sanctioned in the previous year. During FY24, loans totaling ~₹25,089.04 crore were disbursed, marking a 15.94% increase over the ~₹21,639.21 crore disbursed in the previous year.

Loan Book and Disbursement:

• During FY24, loans disbursed reached ~₹25,089.04 crore, a 15.94% increase from ~₹21,639.21 crore the previous year. This marks the largest yearly payout in the company’s history.
• The company’s loan book increased by 26.81% from ~₹47,075.52 crore as of March 31, 2023, to ~₹59,698.11 crore as of March 31, 2024.

Key Financial Ratios:

Net Non-Performing Assets (NPAs):

• The company’s NPAs decreased to 0.99% in FY24 from 1.66% in FY23, a significant 40.36% decrease from the previous year.
• Additionally, the company saw a 32 basis point increase in interest spread, with the net interest margin rising to 2.85% in FY24 from 2.82% in FY23.
• The company achieved a ten-year low of 0.99% for the Net NPA ratio at the end of FY24, compared to 1.66% at the end of FY23.
• The company’s systematic recovery procedures resulted in a drop in GNPA and NNPA to 0.99% and 2.36%, respectively.
• A strong emphasis on recovery and resolution measures led to the net removal of three loan accounts from the NPA list and the recovery of ₹212.70 crore from NPA loans, of which ₹90.68 crore is owed towards the principal and ₹122.02 crore towards interest income, including ~₹58.39 crore in recovered written-off assets.

Future Outlook:

Prospects for India’s Green Finance Industry and Government Initiatives: India’s green finance industry is expanding rapidly, driven by significant government initiatives and a global commitment to enhancing renewable energy capacity. By 2030, up to ~₹46 lakh crore is expected to be invested in India’s renewable energy sector. The FY25 Union Budget allocation for renewable energy has increased by 46% over the previous year to reach ₹14,980 crore, reflecting the country’s commitment to this sector.

Key Policies Announced for FY24:

• Utility-Scale Solar and Onshore Wind: SECI, NTPC, NHPC, and SJVN have been allocated shares of the 50 GW yearly bidding cycle, including at least 10 GW of wind capacity for the 2023–2028 period. The MNRE has also approved 50 solar parks with a combined capacity of around 37,490 MW across 12 states, with 10,401 MW of that power already operational.
• Rooftop Solar: The PM Surya Ghar Mufti Bijli Yojana was introduced, with an initial investment of ~₹75,021 crore, covering 10 million households. Under the program, each household will receive 300 free units of power per month, resulting in annual savings of approximately ₹15,000 to ₹18,000 per household.
• Hydropower: Developers are provided with the option to determine tariffs by backloading, provided they extend the project life to 40 years, shorten the debt repayment period to 18 years, and implement a 2% escalating tariff. For hydroelectric projects where the construction work is awarded and a PPA is signed until June 30, 2028, ISTS charges have been partially waived, with the waiver available in increments of 25% from July 1, 2025, to July 1, 2028.
• Offshore Wind: The MNRE has announced a bidding trajectory for 37 GW of offshore wind capacity, while CTU has completed the planning for transmission infrastructure for the first 10 GW of offshore capacity (5 GW each off the shores of Gujarat and Tamil Nadu). Additionally, regulations for offshore wind leases have been published, offering the possibility of extending the lease duration to 35 years.

The image added is for representation purposes only