Indian Renewable Energy Development Agency (IREDA) is set to raise between Rs 2,500 crore and Rs 3,000 crore through a qualified institutional placement (QIP) this fiscal year. This move follows the company's successful initial public offering (IPO) in December 2023 and a recent QIP that raised Rs 2,005 crore.

Government Stake Dilution

The planned QIP will result in an additional 3.76% dilution of the government's stake in IREDA. This comes after the government already diluted a 3.24% stake in the previous QIP last month.

Gensol Engineering Recovery

IREDA has made significant progress in recovering funds from the crisis-hit Gensol Engineering. The company had an exposure of Rs 700 crore to Gensol and has successfully recovered over Rs 100 crore through bank guarantees and fixed deposit withdrawals. In response to the situation, IREDA filed a petition leading to the National Company Law Tribunal admitting corporate insolvency proceedings against Gensol Engineering.

It's worth noting that the Securities and Exchange Board of India (SEBI) has barred Gensol Engineering and its promoters from participating in securities markets due to fund diversion and governance lapses.

Financial Impact and Growth

The upcoming fundraise is expected to provide IREDA with a substantial borrowing power of Rs 30,000 crore for the current fiscal year. This financial boost comes on the heels of impressive first-quarter results:

IREDA's outstanding loan book reached Rs 79,941.00 crore, with significant contributions from solar, wind, and emerging technologies. The company's net worth rose to Rs 12,402.00 crore.

Tax Benefits for Investors

In a move that could attract more investors, the Central Board of Direct Taxes (CBDT) has notified IREDA bonds as 'long-term specified assets' under Section 54EC. This designation will enable capital gains tax exemption for investors, effective from July 2025.

As IREDA continues to strengthen its position in the renewable energy financing sector, these developments signal a positive outlook for the company's growth and its role in supporting India's clean energy initiatives.

IREDA has taken significant steps to address its exposure to Gensol Engineering, making a 60% provisioning in the current quarter. This move comes in the wake of regulatory action against Gensol Engineering and its impact on IREDA's financial performance.

Gensol Engineering Situation

Gensol Engineering faced regulatory scrutiny when the Securities and Exchange Board of India (SEBI) barred its promoters over alleged misuse of Rs 978.00 crore in loans. This action led to management resignations at Gensol, prompting IREDA to take preemptive measures.

IREDA's Provisioning Strategy

IREDA's CMD stated that the company does not expect additional provisioning for Gensol Engineering if operations resume within months. This indicates a cautious yet optimistic approach to managing the exposure.

Legal Actions

IREDA has not remained passive in this situation. The company has filed cases against Gensol at the National Company Law Tribunal (NCLT) and Debt Recovery Tribunal (DRT) over its Rs 730.00 crore exposure, demonstrating a proactive stance in protecting its interests.

Asset Quality Challenges

The first quarter saw a deterioration in IREDA's asset quality:

The increase in NPAs was primarily driven by accounts from both Gensol and Ecron Group.

Financial Performance

Despite these challenges, IREDA showed resilience in some areas:

• Quarterly revenue increased marginally to Rs 1,947.00 crore
• However, profit after tax dropped to Rs 247.00 crore from Rs 502.00 crore in the previous quarter

The decline in profit can be attributed to the increased provisioning and asset quality issues faced by the company.

Outlook

While IREDA faces short-term challenges with its asset quality, the company's proactive approach to provisioning and legal actions suggests a focus on long-term stability. The ability to resume operations at Gensol Engineering will be a key factor to watch in the coming months, as it could impact IREDA's provisioning needs and overall financial health.