What's In Store For IREDA Going Forward?
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00:00Hello and welcome. You're watching the Small and Mid-Cap show here on NDTV Profit. Thanks
00:12for tuning in. I'm Harsh Saita. With me is my Mawar Shajani. And we have with us the
00:17management of Ireda. Now this stock has been on a tear. In fact, the IPO price on this
00:23one was 32 rupees a share. It listed at 62 rupees. Currently trading near the 300 rupee
00:29mark. So it's been a multi-multi-bagger already over the last 12 months or so. And what we've
00:36seen over the last 6 months or last 1 month alone in terms of returns is 70%. Of course
00:42we speak on the back of Q1 numbers but just the kind of growth which is getting priced
00:48in will be interesting to understand. Welcome Mr. Das to NDTV Profit. Talk us through the
00:53loan growth. 25% is what you've guided for going forward. Does that remain because you're
01:00doing 6% sequential? Do you expect to grow faster than that? Maybe a 30%? Is that possibly
01:07the goal at least in the near term given that your book size is also small? Yeah, good morning.
01:14Thank you. Definitely you see not only this quarter, quarter on quarter growth is happening.
01:20And why we are confident of further growth and improving the numbers with respect to
01:26sanction disbursement is our ministry has already announced that annual 50 gigawatt
01:33of bidding they will be targeting. If you see for a couple of years it was in the range
01:38of 12 to 15. So 12 to 15 to jump to 50 gigawatt of bidding that means the demand will be there.
01:48And once the bidding happens, definitely the tying up for financial support of debt
01:54financing will be there. Then the role of IRIDA is there. So we are quite confident
02:00not only we'll sustain the number, we'll be improvising on that further. Understood. Well,
02:06Mr. Das, you know, I want to understand that for this particular, you know, quarter your
02:11margins have contracted a bit and going forward you're expecting that, you know, your balance
02:18sheet leverage will go up. So where do you expect the margins to go by, by the end of FY25?
02:23Do you see them contracting further? See, we are working in a sector which is new and emerging.
02:33So challenges are there. And then as the name speaks, India Renewable Energy Development
02:39Agency and being the lone extended arm of Minister of New and Renewable Agency, Ministry,
02:46we play a developmental role also in addition to doing normal lending activity being in NBFC.
02:52So we have to be very cautious that how the sector is going to grow and keeping in back
03:00of our mind that 500 gigawatt of installed capacity by 2030, whatever best manner we can
03:05support. At times, if you see so-called peers, exactly there is no peers for us in this industry
03:12because there is no such a big company of, you said a small, but we have the largest
03:17peer-to-peer green finance and the future of green energy development and green financing
03:22will be there. So our growth is almost guaranteed. That kind of demand is there.
03:27We need to only ensure how to augment the supply of equity and how to ensure best
03:33quality corporate governance. If you see our past track record, we have become a benchmark
03:38as far as the reporting of fastest audited result as well as doing annual general meeting
03:43in the country, not only in this industry also. No banking, non-banking company is able to give
03:51in that speed in which you are giving. And also, and you remember one thing, we got listed in
03:58November and since then our investors are quite enthusiastic. Therefore, our team is quite cautious
04:05on 30th June itself. In the evening, we had reported our 30th June provisional results.
04:11So this kind of focus is there. It is not only to improvise loan book or improvise the name,
04:18but also to ensure sustainable qualitative assets and sustainable qualitative governance.
04:23And if you see last four years, our gross and net NPA is gradually reducing. It has been drastically
04:29reduced if you see from March 20, whereas 7.18 was net NPA, now it has gone down to 0.95.
04:35And we are confident in the time to come, not only we will add up to our loan book,
04:40we will also improvise our quality of assets further, reduce the NPA and also sustain this
04:46best quality corporate governance what we have done so far. Understood. Sir, I appreciate all
04:51of that and I appreciate that your numbers were declared as soon as the quarter ended. I
04:57fully take your point. But just with regard to growth, you are saying that likely,
05:05just in terms of pure play renewable, you are the only one, of course, no questions there. But
05:11would you therefore grow at 30 instead of 25, which you have guided for at least for FY 25 and
05:1626 in the near term? We are confident. See, if I tell that my growth will be X number,
05:23then there will be pressure on my team to go for sanction and disbursement.
05:26Sure. That I will never do. And we always focus on fundamentals. And since the demand
05:32size is pretty high, as long as we ensure discipline and fundamentals and quality
05:38corporate governance, whatever numbers you are expecting or the investors are expecting,
05:42probably we will be definitely sustaining that. Got it, sir. And just with regard to what are
05:47the levers for growth, talk to us about those. Where are you disbursing? Just for viewer context,
05:53where are you disbursing your loans? How much of it is to private? How much of it is to
05:59PSU, stroke, government, state, central, whatever? See, we have around 63,000 loan book now,
06:08out of which 26% in private and 24% in government. And if you see function-wise,
06:17we have around solar 27% and wind 17%, hydro 12%, hybrid 3%. Combination of all these,
06:30if you see, it will be 58%, which we call granularity or traditionality. Then rest,
06:36if you take out that government loan of 24%, remaining around 18% is a new and emerging one.
06:42See, as our ministry's name is MNRE, New and Renewable, so we being the extended arm of MNRE,
06:50sole arm of MNRE in finance space, our role is also that we have to come forward and see
06:57that the new and emerging sector is becoming bankable. And we face the challenges and we
07:04play a very critical role in that, making the sector from unbankable to bankable.
07:10So that is what we have done in the past also. And despite doing all these things,
07:15historically, if you see, company has so far, from the beginning to till date,
07:20sanctioned 1,99,700 crores and financed more than 1,31,000 crores. And our cumulative
07:28write-up till date is hardly 202 crores. Understood. And sir, last off on the growth
07:35side of things, I want to try and understand, one is that you're sanctioning loans at a fast pace,
07:41right? How quickly is the disbursement happening and how quickly is the capex actually happening?
07:46If you can talk to us about that, just to understand the income journey better.
07:51See, normally in this vanilla area, that is wind, solar, hydro,
07:55there is not much asymmetry of information in the industry. Since we are there since 37 years,
08:02our team is quite expert in doing that. Normally we have a three by three policy kind of thing.
08:07If it is a takeover loan, three weeks. If it is a press loan, once we have all the document and
08:13information in place, then six weeks. And if it is a completely greenfield and fresh borrower,
08:22new borrower and challenging one, three months. That is on a very higher side I'm saying.
08:27And though that is a normal practice we do, but we do not mandate to our officer that,
08:33no, you have to do by this time or that time. Until unless the team is confident that
08:39qualitative due diligence is done, till such time we do not proceed. Since we have the mastery in
08:45this field, so in the vanilla area, speed is not a problem. But in new and emerging,
08:50that at times it takes even more than six months because the new sector,
08:56new challenges, and if the borrower is new, we have to do all kinds of due diligence,
09:01risk management and risk metrics, touching all points. So that it is not important to
09:08sanction or disperse. We ensure the project becomes successful. Suppose when the account
09:14become NPA, normally people say it is a government company, what happens? It is not like that.
09:18If the project become NPA, even the developer first suffers. So we have to work in such a manner
09:24that it's a win-win situation. So we have to handle them. And we do periodical quarterly
09:30meetings like post my result. Now, all these media agencies are asking and trying to know
09:35post listing, what and how we are doing and how we are going to do. But our strength is that we
09:40have immediately, we are calling post quarterly results. Our borrower meets and we take input
09:46from them. What are the challenges in the sector they're facing? What are the challenges with respect
09:50to any state or project? And we take the input from them and we share with our team and deliver
09:55it. Then we try to come out with a workable solution, what best we can do in the current
10:00situation, which is internal to a data that we realign, which is external to a data, but with
10:05the ministry, we share with the ministry, which is completely external to us, maybe pertinent to
10:10any state or anybody into any project. We try to share with the respective state agencies, how to
10:16sort out those. Right. Mr. Das, so, you know, considering all of this, I want to understand
10:20from a medium term perspective, you know, how will the cost of funds go up by how much first thing?
10:26And how much of a margin contraction are you expecting? If you can quantify that for us.
10:32See, quantification will not be that easy. First, in the last quarter when your team
10:40interacted, one agency had not given us triple A stable, that is care. They have given us now.
10:46And in April, we became Navratna company. So after becoming Navratna company and getting
10:52triple A stable from care. So whatever agencies we have gone for rating, that is ICRA,
10:57Crisil, sorry, not Crisil, ICRA, India rating and care, and other two agencies.
11:03Now, all the agencies are given triple A stable. What was happening when our team used to raise
11:08bonds, go to the market bonds or any kind of loan. So they used to refer one agency as giving
11:13you two double A plus. So they used to lose the opportunity to have a lower rate. So now that
11:18stage is over. So we are confident that our borrowing will be more competitive. And then
11:23already, I think two to three weeks back, we had gone to market and our borrowing was quite
11:28cheaper, 7.4 true, we could borrow for 10 years. And against, which was going on in the market,
11:35even 5 to 7% lesser than that we had taken. And we are confident in the time to come,
11:41the way we are progressing and the way best quality corporate governance we're exhibiting
11:46and discipline we have maintained. We are confident to reduce our borrowing cost and we'll
11:49also look into overseas market because so far we have not gone. And the ratio of forex and domestic
11:59composition, if you see, our overseas composition has drastically gone down to 16%.
12:0412 years back, it was just reverse, 57% was forex and 43% was domestic, but now it has gone to 86%
12:12domestic and 16% forex. And we need to look into overseas green funds and those who are keen to
12:20invest in pure green companies. Post IPO, we are widely known globally also, apart from nationally.
12:27So we are confident we'll bring down our borrowing cost and we'll try to ensure
12:33passing on fair amount of that benefit to the developers so that we come to a win-win situation
12:41where our borrowers get benefited as well as our investors get benefited.
12:45So, sir, are you comfortable with a margin of 3.2% plus? Is that something that you would
12:52be comfortable with as managing director IRIDA? We have already have 3.29% now.
12:59Yes.
13:01So we'll make a lot of effort to sustain that and further improvise.
13:07And we are quite confident in that.
13:08Understood. And this is despite your leverage going up. So your leverage is currently at around,
13:14you've got around 50,000 odd crore of debt on a book size on an AUM size of around 63,000 crore.
13:21Your capital adequacy is roughly 20%. So on this book size, or even as your leverage
13:26creeps up and as your efficiency goes up, that 3.2% odd will get maintained in terms of margins.
13:353.2 to 5 or between 3.5 will be our objective. But as I said, it is not only to
13:45have a lower rate or make profit. We have to pass on to the sector so that the sector becomes
13:51bankable and 500 gigawatt also achieved. And we have a qualitative asset in place also.
13:58Mr. Das, you know, credit costs are currently low for you.
14:02When do you expect them to normalize going forward?
14:08See, never ever will focus on any numbers. Last four years, I have been telling,
14:17I'm here in this company since four years. On the day one, I have told, don't focus on numbers,
14:23because object is 500 gigawatt and demand size is pretty huge. And we have expertise in this
14:30industry. As long as we maintain discipline, numbers are going to follow. We can improvise
14:36all numbers, whatever you are seeing today. Understood, sir. But sir, you know, your credit
14:42costs over the last year or so, they've been on the lower side, largely because asset quality
14:49across at a system level is good. As asset quality starts to normalize, what will your
14:57ECL or your credit loss be like? Just wanted an understanding so that we can try and help the
15:05viewer to try and understand as to how do you build in that number or broadly, how do you look at
15:12credit costs? First of all, the tricks in renewable energy financing is, if you maintain discipline,
15:18your asset quality is guaranteed. If you are having a solar wind hydro project and having a
15:24PPA in place, so only thing you have to ensure your interest during construction is minimized.
15:32That you can happen when you are having a borrower lenders, a fair amount of
15:38information sharing with clarity, so that speed in financing to the project happens with discipline,
15:45so that IDC is reduced. Second, once it is commissioned, asset risk matrix is completely
15:51changed, then the interest should be changed accordingly. And we have a dynamic interest
15:57mechanism, system mechanism in place, which captures under construction, just completed
16:03construction, the COD and post-COD. So three, four varieties and those systematically captured
16:09so that interest is automatically, which is risk being unloaded initially, it is offloaded.
16:17So what you will see, particularly in vanilla RE, any lender or any project developer, if they do
16:25the project, as well as project financing with discipline, asset quality is going to be guaranteed
16:32sustained. That is what we have proven in last four years. We are not allowing new NPA to come,
16:39we're addressing the old NPA to be addressed. See, despite that, any project financing, there should
16:45be some amount of risk, but how best you capture those early warning signals, as I said, every
16:52quarter we do our borrowers interaction. So we always connect to the borrower from the beginning
16:58of the problem. That is what probably generally is missing in other lenders.
17:04So growth 25 odd percent, margins likely will sustain in fact, above 3.2%.
17:13Therefore, and credit costs should remain soft is what you're suggesting. Therefore,
17:20profit after tax growth to be 25% plus and ROAs to be more than 2%. Is that how
17:28one should look at IRIDA for a sustainable period of time?
17:33See, I do not have any doubt on these numbers, what you said, because we have been exhibiting
17:40the same and if continuously for four years we are improvising. So there is fair amount of
17:48confidence, level of confidence on us by you and the investor for sustaining those numbers
17:55and further improvising on that.
17:57Sure. Thank you so much, Mr. Das for speaking with us very candidly and
18:02for taking our time. It's been a long conversation. Thank you so much for this.
18:07Thank you very much.