IREDA - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 4.0

📊 Financial Overview: IREDA (Indian Renewable Energy Development Agency) shows strong financial momentum with a QoQ PAT growth of 41.6%, rising from ₹247 Cr to ₹549 Cr. The company’s ROE of 18.0% and ROCE of 9.37% reflect improving capital efficiency. EPS stands at ₹6.28, and the P/E ratio of 24.7 is slightly above the industry average of 23.7, while the PEG ratio of 0.64 suggests undervaluation relative to growth. The debt-to-equity ratio of 5.41 is high, typical for a financing institution. The stock is trading at its 50 DMA (₹152) and below its 200 DMA (₹163), indicating a consolidation phase.

💼 Business Model & Competitive Edge: IREDA is a government-owned NBFC focused on financing renewable energy and energy efficiency projects. Its strategic alignment with India’s green energy goals, access to low-cost capital, and policy support provide a durable competitive advantage. The company benefits from rising demand for clean energy financing and its niche positioning in the renewable sector.

📉 Valuation & Entry Zone: With RSI at 53.2 and MACD at 0.83, momentum is neutral to mildly bullish. The stock is down ~35% from its 52-week high of ₹234. A favorable entry zone lies between ₹145–₹150, offering a reasonable margin of safety for long-term investors.

📈 Long-Term Holding Guidance: IREDA is a strong long-term hold for investors seeking exposure to India’s renewable energy financing boom. Its improving profitability, strategic relevance, and growth potential make it a compelling play. Monitor asset quality, disbursement growth, and policy tailwinds for sustained performance.

✅ Positive

• Strong QoQ PAT growth of 41.6%
• ROE of 18.0% reflects solid shareholder returns
• PEG ratio of 0.64 indicates undervaluation relative to growth
• EPS of ₹6.28 supports earnings quality

⚠️ Limitation

• High debt-to-equity ratio (5.41) typical of NBFCs
• ROCE of 9.37% is moderate
• Decline in FII (-0.12%) and DII (-0.38%) holdings
• No dividend yield

📉 Company Negative News

• Stock down ~35% from 52-week high
• Volume below weekly average indicates reduced trading interest

📈 Company Positive News

• Strong quarterly earnings and disbursement growth
• Strategic role in India’s renewable energy expansion
• Government support and policy alignment with green financing

🏭 Industry

• Renewable energy financing benefits from global and domestic climate goals
• Industry P/E of 23.7 reflects moderate valuation
• NBFCs in niche sectors gaining traction amid infrastructure push

🧾 Conclusion

IREDA is a fundamentally strong and strategically positioned NBFC with improving profitability and a clear growth trajectory in renewable energy financing. While leverage is high, its policy alignment and earnings momentum make it a compelling long-term hold. Investors may consider accumulating near ₹145–₹150 for exposure to India’s green energy transition.