IREDA Shares At All-Time High: Multibagger PSU Energy Stock Grows 6x From Listing Price On Block Deals

The shares of Indian Renewable Energy Development Agency Ltd. (IREDA) reached record highs on Wednesday, surpassing its previous high of Rs 214 to hit an intraday peak of Rs 220.65. This surge follows a series of significant transactions and strategic initiatives by the company.

On Tuesday, IREDA witnessed a substantial recovery, rallying over 6% in the final minutes of trading. This uptick was spurred by a block deal involving 50 lakh shares, equivalent to 0.16% of its total equity, with a transaction value of Rs 100 crore. Market sentiments were further buoyed on Wednesday with another notable block deal involving 89.2 lakh shares, amounting to 0.35% of total equity, valued at Rs 189.4 crore and transacted at an average price of Rs 213 per share.

ICICI Direct Research has initiated a 'BUY' recommendation on IREDA, setting a 12-month target price of Rs 250 per share. The brokerage firm projects robust business growth ahead for IREDA. They anticipate continued strong growth in Assets Under Management (AUM) at approximately 30% Compound Annual Growth Rate (CAGR) for FY25-26E, which is expected to enhance profitability through operational efficiencies.

While near-term margins may face pressure, the report highlights potential benefits from operational expenditure management and stable credit costs, projecting a profitability run rate at around 20% CAGR. Return on assets (RoA) might experience slight downward pressure in the short term but is forecasted to stabilize and potentially improve to 1.9-2% in subsequent periods.

"IREDA has demonstrated impressive AUM growth, achieving a 30% CAGR from FY21 to FY24, with its loan book reaching ₹58,775 crore," the report noted. With the government intensifying its focus on renewable energy and aiming to increase reliance on sustainable sources, ICICI Direct expects IREDA to sustain its strong loan growth trajectory, projecting AUM to reach approximately Rs 99,330 crore by FY26E. Management has outlined ambitious plans to target an AUM of approximately Rs 3.5 lakh crore by FY30E, aiming for Maharatna status, contingent upon regulatory guidelines and approvals.

The report emphasizes the long-term growth narrative amidst the renewable sector's expanding opportunities. Despite IREDA's comparatively smaller balance size, the firm remains optimistic about sustained business growth, driven by ongoing government initiatives to expand renewable energy capacity. They foresee AUM growth continuing at around 30% CAGR for FY25-26E, accompanied by a steady RoA ranging from 1.8% to 2%.

Consequently, ICICI Direct Research assigns a Buy rating on IREDA shares, valuing the stock at Rs 250 based on a discounted cash flow (DCF) model with a discounting rate of 12% and terminal growth estimated at approximately 6.5%. This valuation corresponds to approximately 5.6 times the estimated FY26E Book Value (BV).

In a recent interview with CNBC-TV18, IREDA's CMD Pradip Kumar Das disclosed the company's ambitious plans to secure further growth capital. IREDA has formally requested government approval for a Follow-on Public Offer (FPO) aimed at raising between Rs 4,000 crore to Rs 5,000 crore. Das emphasized the necessity of additional equity infusion to sustain the company's rapid expansion trajectory.

Additionally, IREDA has petitioned the Finance Ministry for inclusion under Section 54EC of the Income Tax Act. This move is intended to lower borrowing costs, enhancing the company's financial flexibility and operational efficiency amidst its robust market performance.

IREDA made its stock market debut in November last year at Rs 32 per share and has since witnessed a meteoric rise in investor confidence. As of 2:15 pm on the National Stock Exchange (NSE), IREDA shares were trading at Rs 218.68, marking a gain of nearly 6.50% for the day. Year-to-date, the stock has doubled in value, reflecting a remarkable 104% increase in 2024 alone.

At the close of the March quarter, the government retained a controlling stake of 75% in IREDA, highlighting continued state support for the company's strategic initiatives in renewable energy financing.

The surge in IREDA's stock price reflects growing investor interest in India's renewable energy sector, driven by favourable regulatory frameworks and an increasing focus on sustainable development goals. As IREDA explores its next phase of growth through strategic equity expansion and cost optimization measures, market analysts anticipate continued bullish sentiment and potential further upside for the stock in the foreseeable future.

IREDA's healthy financial performance and initiatives have positioned it favourably within the renewable energy financing landscape. The company's ability to attract investment interest through block deals and its forthcoming FPO shows confidence in its growth prospects.

Analysts believe that IREDA's proactive approach in capital raising and operational efficiencies will not only boost its market position but also contribute to India's renewable energy ambitions. With ongoing government support and favourable market conditions, IREDA remains poised for continued growth and value creation in the renewable energy financing sector.