Indian Renewable Energy Development Agency Ltd (NSE:INAR) (IREDA) shares have captured investor attention following a significant development in the company’s financial strategy. On Monday, March 17, IREDA’s board approved an enhancement of its borrowing programme for the current financial year by a substantial INR 5,000 crore, signaling ambitious growth plans for the renewable energy financier.
This strategic move increases IREDA’s borrowing limit for FY25 from INR 24,200 crore to an impressive INR 29,200 crore, representing a 20.7% expansion in its funding capacity. According to the company’s exchange filing, this enhanced borrowing will be executed through various financial instruments including taxable bonds, subordinated tier II bonds, perpetual debt instruments, term loans from banks and financial institutions, credit lines from international agencies, external commercial borrowings, and short-term loans.
The development comes at a crucial time for India’s renewable energy sector, which is experiencing rapid growth as the country pushes toward its ambitious clean energy targets. As a key financial institution in this space, IREDA’s expanded borrowing capacity suggests management’s confidence in the pipeline of renewable projects requiring funding in the coming fiscal year.
However, investors should note that last week, the company faced a setback when the Reserve Bank of India (RBI) declined its request to make an equity investment in the 900 MW Upper Karnali Hydro Electric Power Project in Nepal. This project is a joint venture involving IREDA, GMR Energy, GMR Power (NSE:GMRP) & Urban Infra, GMR Lion Energy, Nepal Electricity Authority, and state-run SJVN (NSE:SJVN) Ltd.
IREDA had planned to invest approximately INR 174.22 crore for a 5% stake in this venture, which would have entitled the company to nominate a director on the JV’s board. This development may impact IREDA’s international expansion plans in the hydropower segment.
With these significant developments potentially impacting IREDA’s growth trajectory, investors are likely questioning whether the current market price accurately reflects the company’s intrinsic value. The expanded borrowing capacity could fuel faster loan book growth, potentially enhancing future earnings.
Investors seeking to make informed decisions about IREDA would benefit from understanding how these recent announcements might affect the company’s fair value. InvestingPro’s comprehensive valuation tools offer precisely this kind of analysis, using multiple financial models to determine a realistic assessment of IREDA’s worth relative to its current market price.
Rather than relying on market sentiment alone, savvy investors can leverage InvestingPro’s fair value feature to determine whether IREDA shares are currently trading at a premium or discount to their intrinsic value. This insight could prove invaluable when deciding whether to initiate, add to, or reduce positions in the renewable energy financier.
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