IREDA Q2FY25: Hydro and Solar Loans Lead Growth as India Targets 500 GW RE
About the stock
➡️IREDA is PSU NBFC engaged in the business of financing green energy projects. Its finances project such as solar, wind power, hydro power etc. GoI has conferred the Navratna status upon IREDA in April 2024. Loan portfolio well diversified across the 23 states and 4 UT in FY24. It contributing major role in fueling the India’s RE taget of 500 GW by 20230.
Loan book up double digit 36% YoY /8% half yearly
➡️As on 30 sep 2024, loan book stood at 64,564 Cr represent growth of 36% YoY while half-yearly growth was moderate at 8%. This growth led by loan given to state utilities (43% YoY) followed by hydro power at 37%, solar 19% and wind at 7%.
➡️Along with loan book disbursement and sanction grew 44% and 240% to stood at 4,461 Cr and 8,650 Cr respectively.
Asset quality improved – GNPA down 17 bps/ NNPA jump 5 bps
➡️During the half year FY25, gross asset quality has improved by 17 bps declined in GNPA stood at 21.9% (1,415 Cr) in Q2FY25. While NNPA jump 5 bps to 1.04% (666 Cr) despite the surge in provision coverage ratio.
Borrowing jump 10% H2FY25 – domestic rise while foreign declined
➡️During H2FY25 company’s borrowing increased by 10% to stood at 54,639 Cr. Dometic borrowing raised 13% to 45,691 Cr while foreign borrowings declined 4%.
➡️In domestic borrowing, bank loan weightage has declined to 49% in Q2FY25 vs 59% in Q2FY24. while money raised through bonds weightage rise to 51% in Q2FY25 vs 41% in Q2FY24. The rising chance of rate cuts will declined the borrowing cost for company as bank loan and bond both equal weight in borrowing.
➡️Within the foreign borrowing, un-hedged portion rise to 27% in Q2FY25 vs 22% in Q4FY24. While hedged portion has declined equally to increased in un-hedged. The surge in un-hedged portion increased the currency risk.
Valuation and key metrics
➡️During the quarter, Yield on loan jump 15 bps to 9.92% while Cost of borrowing decline by 5 bps to 7.8%. This result in surge in spread and NIMs by 20 bps and 17 bps to stood at 2.12% and 3.34% respectively. The cost of borrowinf can further decline in coming quarter as RBI ready to ease monetary policy. Capital Adequacy ratio stood at 20.24% which is above the guidance of RBI but decline by 68 bps YoY.
Q2FY25 Results updates
➡️Interest income increased by 37% YoY (6% QoQ) to 1,577 Cr while interest expense jumped 30% YoY (6% QoQ) to 1,030 Cr. This result in NII grew by 52% YoY (8% QoQ) to 547 Cr. The surge in NII led by Nims expansion and increased in new loan book.
➡️PPOP grew 36% YoY (11% QoQ) to 494 Cr due to rising Opex (411% YoY). While PAT surged by 36% YoY and moderate on QoQ basis at 1% to stood at 388 Cr. The Jump in provision off set with the reduction in tax expense makes PAT growth unchanged with Operating profit.
The image added is for representation purposes only
