PSU miniratna Indian Renewable Energy Development Agency (IREDA) will be the first company to debut on the bourses among the five mainboard IPOs — Tata Technologies, Flair Writing, Fedbank Financial Services, and Gandhar Oil Refinery India.

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After a strong response to the IPO, the shares of state-run IREDA will be listed on the exchanges on Wednesday, November 29. Ahead of the listing, the company's shares are commanding a premium of ₹11 in the grey market, indicating a gain of 34% on debut.

"Despite being fully priced-in public offer, IREDA managed to receive overwhelming response from all sets of investors especially from the QIB segment, which got oversubscribed by 104 times. Considering the high subscription demand and an optimistic market mood, a healthy 25% and above listing gains can be assumed against the issue price of ₹32," said Prashanth Tapse, Research Analyst at Mehta Equities.

Tapse believes the listing premium is justified on the back of the company being tagged as a leading PSU player in renewable energy financing and advisory services and a possible upgradation from a Miniratna to a Navratna company in near future, which increases financial autonomy, allowing it to accelerate faster in the competition.

"The grey market premium (GMP) for IREDA shares is currently ₹10, suggesting that the shares could list at around ₹42 per share. The IPO was priced fairly, reflecting the company's strong fundamentals and growth potential. Therefore, the IREDA IPO is likely to generate decent listing gains," said Shivani Nyati of Swastika Investmart.

With IREDA IPO receiving a healthy subscription of about 39 times, Prathamesh Masdekar of Stoxbox expects a strong listing for the issue when it lists on the bourses tomorrow. "We expect the IPO to list at a premium of around 35% to the issue price of ₹32 per share."

"Considering power-financing NBFCs are expected to continue this growth momentum and are likely to be driven by increased power demand, rising population, renewable integration, and the country's sustainability goals, we are positive for IREDA, Masdekar said.

Additionally, the analyst said that IREDA has the best asset quality amongst peers, with its GNPA ratio at 3.13% at the end of September 2023, compared to 3.14% for REC and 3.67% for PFC.

Astha Jain of Hem Securities expects IREDA to list at a 35-37% premium, citing the company's strategic role in government initiatives in the renewable energy sector. "The company has established and trusted brand name operating in a rapidly expanding sector," Jain said.

IREDA subscription status

The ₹2,150-crore issue was subscribed 38.8 times on the last day of the bidding process. The quota reserved for retail individual investors (RIIs) was subscribed 7.7 times, qualified institutional buyers 104 times, and NII 24 times.

The company sold its shares in the range of ₹30-32. The IPO comprised of a fresh issue of 40.32 crore shares aggregating to ₹1,290.13 crore and an offer for sale (OFS) of 26.88 crore shares worth ₹860.08 crore.

At the upper end of the price band, the post issue implied market capitalisation of the company would range between ₹8,063 crore and ₹8,601 crore, analysts say.

The funds raised will be used to augment the capital base to meet future capital requirements and onward lending. IREDA expects to receive the benefits of listing the equity shares on the stock exchanges.

Financials

For the six month ended September 2023, IREDA recorded a total income of ₹2,320.46 crore, compared to ₹1,577.75 crore a year ago. The company's net profit for the half year came in at ₹579.32 crore as against ₹410.27 crore last year. The gross and net NPA for the half year was at 3.13% and 1.65% from 5.06% and 2.72%, respectively. The provision coverage ratio stood at 48.11%.

IREDA is the country's first PSU IPO to hit the market this year and the first after LIC's stock market debut in May last year. LIC currently is India's largest IPO.

IREDA finances projects across multiple Renewable Energy sectors such as solar power, wind power, hydro power, transmission, biomass including bagasse and industrial co-generation, waste-toenergy, ethanol, compressed biogas, hybrid RE and green-mobility.

First Published:Nov 28, 2023 2:15 PM IST