The debut date of IREDA is November 29. Will the premium on the gray market be beaten?

 The debut date of IREDA is November 29. Will the premium on the gray market be beaten?

IREDA Initial Public Offering This will be the first of the five initial public offerings (IPOs) that finished last week, and the first listing for a government firm since Life Insurance Corporation of India in May 2022.

On November 29, the government-owned Indian Renewable Energy Development Agency (IREDA) is anticipated to make its public debut at a price of about Rs 30. This indicates that, compared to the issue price of Rs 32, the possible listing price might be around Rs 42 per share.

The robust listing premium was ascribed by experts to the robust IPO subscription figures, the growing momentum in the renewable energy sector and power financing non-bank financial companies (NBFCs), and the robust financial performance characterized by superior asset quality figures in comparison to peers and the quickest loan growth among peers. supplied.

This will be the first of the five initial public offerings (IPOs) that finished last week, and the first listing for a government firm since Life Insurance Corporation of India in May 2022.

The banking institution's initial public offering (IPO) saw a robust 38.8 times subscription between November 21 and 23, with high net worth individuals purchasing 24.16 times and qualified institutional purchasers purchasing 104.57 times the allocated quota. Employees purchased 9.8 times as many shares as were allocated to them, while retail investors purchased 7.73 times as many shares.

According to Shreyansh Shah, a research analyst at Stockbox, "we expect the IPO to list at around 35 per cent premium to the issue price of Rs 32 per share."

Shreyansh is optimistic about IREDA, given that power-financing NBFCs are anticipated to maintain this development momentum and are probably propelled by expanding power consumption, population expansion, integration of renewables, and the nation's sustainability objectives.

Furthermore, as of the end of September 2023, its gross non-performing asset (NPA) ratio is 3.13 percent; in comparison, its asset quality is the best, with 3.14 percent for RECs and 3.67 percent for PFCs.

Experts say that the price-to-book ratio of 1.2x for the state-run Mini Ratna non-banking financial institution represents a discount to its peers' average. At the issue price, the market capitalization is around Rs 8,600 crore.

According to experts who spoke on condition of anonymity, its IPO shares traded at a premium of around 31% to the issue price on the gray market, an unofficial market for trading IPO shares prior to listing. Prior to the November 21 opening, the gray market premium was around twenty-five percent.

According to Prashant Tapse, senior VP of research at Mehta Equities, "listing gains of 25 per cent and above can be expected given the high subscription demand and optimistic market mood."

Given that the company is recognized as a major PSU player in financing and advisory services for renewable energy and that it may soon upgrade from Mini Ratna to Navratna company, increasing its financial autonomy and granting permission, he thinks the listing premium is justified. to advance through the tournament more quickly.

Head of wealth at Swastik Investmart Shivani Nyati agrees that IREDA will probably see strong listing benefits. "The IPO was priced appropriately, reflecting the company's strong fundamentals and growth potential."

Over the course of FY21–FY23, the top non-banking financial institution (NBFI) focused on funding renewable energy projects saw a robust increase in its gross loan portfolio, growing at a rate of 30% CAGR and 58% CAGR, respectively. A profit has been noted.

In the July–September FY24 quarter, IREDA's cost of funds was 3.8%, less than that of competing RECs and PFCs, which were 7.4% and 7.2%, respectively.

Through the IPO, the lender raised Rs 2,150.21 crore by issuing 67.19 lakh equity shares. This amount included an offer to sell shares for Rs 860 crore and a new issuance of shares valued at Rs 1,290.13 crore.

The net proceeds from the new offering will be largely used by IREDA to satisfy its capital needs going forward and to strengthen its Tier-I capital base in preparation for more lending.