The Indian Renewable Energy Development Agency (IREDA) Ltd saw increased investor interest on Monday after the Reserve Bank of India (RBI) announced changes to the Priority Sector Lending (PSL) framework, expanding loan classifications for the renewable energy sector.
As per the revised circular, the RBI aims to broaden the scope of loans eligible for PSL classification under renewable energy. Notably:
- Bank loans up to INR 35 crore for renewable energy-based power generators and public utilities will now qualify as PSL.
- For individual households, the borrowing limit for renewable energy projects has been increased to INR 10 lakh per borrower.
These changes are expected to facilitate greater credit flow toward India’s ambitious clean energy transition, benefiting companies like IREDA that specialize in financing renewable energy projects.
IREDA’s Growth Momentum & Retail Expansion Plans
IREDA, a key financial player in the renewable energy space, has been actively expanding its loan book. In October 2023, the company announced plans to establish a wholly owned retail subsidiary to cater to the B2C renewable energy market under initiatives like:
- PM-Suryaghar (Rooftop Solar)
- PM-KUSUM (Solar for Farmers)
- Electric Vehicles & Energy Storage
- Green Technologies & Sustainability Solutions
The Department of Investment and Public Asset Management (DIPAM) has already approved this proposal, signaling government backing for IREDA’s expansion into emerging green energy sectors.
This strategic move comes on the back of stellar financial performance by IREDA in recent quarters. During Q3 FY24, the company’s loan sanctions more than doubled compared to the previous year, while its loan book outstanding surged by 36% YoY to INR 69,000 crore.
Valuation Check: Is IREDA Overvalued?
Despite the strong growth trajectory, InvestingPro’s fair value analysis suggests that the stock is currently overvalued. The fair value of IREDA stands at INR 126.6 per share, implying a 25.5% downside risk from the current market price of INR 170.
For investors assessing entry points, InvestingPro’s fair value tool offers real-time valuation insights using multiple financial models, helping them determine whether a stock is overvalued, fairly valued, or undervalued.
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