IREDA Gets Nod For Retail Business: What It Means, How Will It Impact The Company & More?
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00:00Pradeep Kumar Das, Chairman and MD at Indian Renewable Energy Development Agency, IREDA,
00:05is speaking with us today. Mr. Das, great to have you on the show.
00:09Your Q2 FY25 numbers are looking robust. So, interest income up 37%,
00:16interest expense has also gone up 30%, NII is up 52%.
00:23Can you tell us what has been the big highlight for you this quarter, what has worked?
00:27Yeah, very good morning. Thank you. So, nothing big highlighted because we have
00:32been consistently growing in this ratio. I think slightly better. If you see
00:38the H1 to H1 comparison of Lungo, the last four years CGR of 27%. If you see H1 to H1 comparison
00:48of this period, it is in the range of 36%. So, that is what a significant factor is there.
00:54Otherwise, if you see last 18 quarters, we have been growing phenomenally, exponentially.
01:01And if I say 18-year quarters, that means when we started 18 quarters, the base was low.
01:08But every quarter we are setting a benchmark for ourselves, the base we are improvising.
01:13But however, the growth ratio, we are further improvising on that. See, the sector in which
01:20we are, we are there since 37 years. And the sector is quite exponential now,
01:28mainly keeping in mind the 500 gigawatt target of Government of India,
01:32it's a global commitment what we are giving for 2030 of 500 gigawatt of non-fossil fuel
01:38in some capacity. Already, we have crossed 200 gigawatt and another 300 gigawatt capacity
01:44addition to happen. And we are enjoying a market success here significantly,
01:48and will continue to do that. So, maybe it sounds encouraging, but I think
01:54we are habituated of giving this kind of good performance since continuously 3-4 years.
02:02Okay, coming to your net profit number, it's of course, it's looking good, but slightly below
02:08what estimates were on the street. So, I understand you've been a consistent performer,
02:12Mr. Das, I appreciate that. But do you think that you are going to have a better
02:19quarter 3 going forward? What is the outlook? Are you seeing this growth at a steady rate or
02:25you're seeing an improvement? There will be certainly further improvement in this. And if
02:30you see the track record, always Q1 will be X and Q2 will be X plus Y and Q3 will be X plus Y plus Z
02:40and Q4 will be X plus Y plus Z plus ZY. So, that way we grow and that is the way probably the
02:46sector also grows. And if you see the second quarter, most of the projects do not take place
02:51because of the rainy season. The consumption doesn't happen that way. So, from now onwards,
02:57a lot of things will happen. And if you see our sanction has grown quite high in this period,
03:02and certainly the execution is going to happen in this quarter as well as the last quarter.
03:06So, what we had focused earlier, normally in the first quarter it used to be lower,
03:11but this time we had focused from March onwards that how can we have a Q1 better performance.
03:17And our Q1 up to our 2425 was best in the history of the company so far. And as I told,
03:23because of the seasonal impact of rainy season and other things, so Q2 is not that encouraging.
03:29But despite that, since our sanction has gone up, we are quite confident that we are going
03:33to further improve our Q3 and E4. Mr. Das, good morning. Neeraj here.
03:40What is this impairment hit that you've taken? On what account is it? Or is it a particular sector,
03:46particular account? It's a large number. Yeah, see, not very large. Look at the book size of
03:5465,000 crore and cumulative sanctions so far, more than 2.08 lakh crores and financing of 1.35 lakh
04:02crore. This is 100, 140 crore is not a big figure. See, a couple of old assets were there
04:09and we wanted to go to shut out those things. And the impact of those is going to be visible
04:15because two things, one, certain settlements happened, only one account, and couple of
04:22account which has gone to stage three, we are confident that is going to come out, come back
04:26again to stage one or stage two category very soon. Because we are focused also having this
04:32comfortable provisioning kind of thing. Our provision coverage ratio, if you see, 52.
04:37And earlier, if you see, vis-Ã -vis the same, in the half year, previous year, it was slightly lower
04:43perhaps. So therefore, it is not at all alarming. It's one or two accounts, handling those will not
04:49be a problem. No, no, sir. So, okay. I thought the number was 338 crores, the impairment on
04:56financial instruments, 338 crores, right? I'm not saying it's alarming. All I'm saying is,
05:01what is this, on what, on which account is this? And the reason why I ask this is because, I mean,
05:08renewable sector has such a strong tailwind, it's just surprising to see an impairment hit. So,
05:14on what account is it? And is this a one time hit? Or could it get repeated? It's 338 crores,
05:20right, sir? Yeah, see, as you said, renewable, this is an exception. But renewable in the
05:28country in the last 10 years has grown. But we are carrying these assets since the last 37 years.
05:36We are a 37-year-old company. As I told you, some of our old assets,
05:41particularly the small hydro and bioenergy space, some of the assets were there. And I'm sure,
05:47this will become an exception kind of thing. This will not become a regular for us.
05:51Okay. So, we've seen, sorry, just on this only. So, we've seen a number of 338 crores, you are
05:56saying that a smaller number or another number may come up, but it is not to the extent of 300,
06:02350 crores that we'd see every quarter. The next quarter itself might have a smaller impairment,
06:06if at all. I think in the last four or five quarters, if you see, this is a bigger figure
06:11you have seen now. As I'm saying, we are confident this will be an exception.
06:16It is an exception and not a rule. Okay. But you still haven't told me, sir. I mean,
06:19what account or what sector is it? Can you share that?
06:23Deep down, we'll be sending the information to the Stock Exchange very soon, because we are not
06:28giving the details so far. Okay. We haven't published what is the statutory information
06:32required. Because you see, we are the only company in India, in banking, non-banking space,
06:38who could report the audited result, limited result in 10 days' time.
06:42So the account breakdown information will be serving very shortly.
06:46Okay. Fair enough. The other thing which is exciting is the approval that you've received
06:51for setting up the retail business for IREDA. Can you explain a little about this, Mr. Das?
06:57What exactly will you be doing in this retail business? What are the segments that you will
07:02be servicing? And what is going to be the impact for your revenues from this segment?
07:09See, almost, I think, six to seven months back, we had indicated that we have sought the permission
07:16from the Government of India to have a wholly owned subsidiary for catering to the retail space.
07:20Because we, being a project development finance organization working since 37 years,
07:26the retail and SME and MSME space, renewable, is not well addressed by the banking sector.
07:36So what we have realized there, you look at the Kusum or Rupta Solar or other small categories
07:44segment, semi-segment, those have not been catered well. And we envisage around 8 to 8.5
07:50lakh crores of business in that space in the next five to six years' time.
07:55So what is the number? What is the number?
07:58Eight lakh crores, roughly.
08:00Eight lakh crores from the retail side?
08:04Retail side, yeah. That is a rough estimate we have made. And today, our market share
08:11is almost 11-12% in renewable financing. And particularly if you see the vanilla area where
08:19we have 57% assets, there are by and large banks and other lenders are also coming.
08:24But we have around 19% emerging area assets where others are not that comfortable.
08:30And we started like ethanol, one and a half year back. E-mobility storage,
08:34just six months to one and a half year back. And our book size has gone up to 19% in that space.
08:39That means in the new and emerging one also, we are having that kind of command in which we had
08:45earlier also. So in this space, since others are not coming forward, we have envisaged that huge,
08:52not only business opportunity, this is also a sectoral requirement. Because this space,
08:57they're struggling to get a bankable solution.
09:02For example, tell us if this is where you will be lending the PM Kusum scheme, rooftop solar,
09:09EVs, energy storage, green technology, sustainability, energy efficiency,
09:15and other B2C segments. Are these broadly the areas which you will be servicing?
09:21Yes. See, what is our object or purpose for having a retail bond is,
09:28so far we have expertise in doing project financing. But we have expertise in understanding
09:33and analyzing the new and emerging technology and renewable space. So what we have planned,
09:38that we can handle the microfinance companies or self-help groups, those who are in aggregator load
09:46initially to cater to them. And in due course of time, we can develop and design strategic partner
09:52where our USP, our process, and other things will be ours. Only the front-end,
09:58connecting with the market, those agencies will be going into partnership mode. So that front-end
10:04will be there, back-end will be there, our policy, our intelligency, our due diligence,
10:08that will be in place. We can go for a franchise model, but that is in the very initial stage.
10:13We are envisaging around some, maybe if you go with a rough estimate out of 8 lakh crores of
10:19business, if you go by the normal market size, what we are having around 11-12%, similar size
10:25you can get also there. So roughly around 80 to 1 lakh crores maybe could be possible, but
10:30we have to have a very different kind of working model for that. With the existing model, we will
10:35not do it. And that is the reason we have requested Government of India that allows us to go for a
10:39completely different set of subsidiary, which will be catering to retail area space.
10:46And we want to make it a combination of FinTech, combination of microfinance and company,
10:52combination of project finance like Ereda, and combination of poor retail whatever is there.
10:59And we want to make it a fully IT-based implemented system, so that a hardcore
11:05renewable requirement whatever is there, we can cater to them.
11:09So Mr. Das, for all of these plans, what is the funding?
11:14As far as the impairment is concerned, I think it is 3.82 crore, not 382 crore. I think,
11:21can you please cross check it? I think 384 lakhs.
11:25Okay, so you do not think it is a big amount you are saying?
11:28Not at all, not at all.
11:30I thought the number, to my mind, as per the release, impairment on financial instruments
11:36talks about 338.5 crores. But maybe you are right, sir. Never mind. As long as you are saying
11:41that this is not a recurring expense, I do not think the street would be too worried. I was
11:45looking at the exchange release, which said 338 crores. But okay.
11:493.8 crores. So in a balance sheet size of non-book of 64 and a half thousand crores.
11:57Okay.
11:58It is a small amount.
11:59Okay. Let us talk about this thing, Mr. Das. What about the fundraising for
12:05implementing all of these plans? When does the QIP happen? What is the kind of dilution that
12:10you reckon you will do for future growth? What is the kind of demand that you sense?
12:15We have received up to 7% dilution, either in single tranche or multiple tranches.
12:22We had already indicated earlier around four and a half thousand crores of
12:26requirement by January, February. But now after receiving the retail,
12:31and then almost our group city activities at one stage, and we have to start parallel with
12:38these two activities. So our fund requirement might go up, but exact amount of requirement
12:44will be connecting with the market intermediaries very soon. But for sure, by this year end,
12:50maybe by February end, we have to ensure that a face equity infusion happens in the company,
12:56because the kind of disbursement that we have planned, borrowing plan, almost 24 and a half
13:03thousand we have planned. So around 5,000-6,000 crores maybe in this space, but that exact amount
13:11we will see after working, and also we will see the market condition.
13:14Oh, sure, of course. But you believe by Jan or Feb, about 5,000-6,000 crores worth of fundraising
13:19is what you will probably need to do? Earlier our assessment was four and a half thousand.
13:24Now you're raising it to five to half 6,000. It will further go up. So exact amount we do,
13:29we have not ascertained. Got it. Again, since the 7% of the pop-up cap
13:34given to us, we have to see what is up, because it is a TIP mode. And for TIP,
13:39there is a semi-mathematics. So we'll see what best we can do in this space.
13:45And again, as far as debt is concerned, since our GIPCIT will be in operation,
13:49we'll be also asserting to various green funds overseas.
13:53And we'll see that how best we can bring it down the borrowing cost to that.
13:58Got it. Okay, I do stand corrected, but it's 33.85 crores, Mr. Das. Not 3.38, not 3.38.
14:06It's 33.85 crores, the impairment for the quarter. So yes.
14:10Isn't that a big amount? Yeah, not a big amount at all. Perfect.
14:14Great. Good talking to you, Mr. Das. Thank you so much for taking the time out and being with us
14:18today and speaking first to us. We wish you all the best for the quarters ahead.
14:22Thank you. Thank you, Neeraj. Thank you, Tamanna. Thank you, Samina.