Center Infuses ₹15 Billion in IREDA to Boost Lending to the Renewable Energy Sector

The Cabinet Committee on Economic Affairs has approved the equity infusion of ₹15 billion (~$201.27 million) in the Indian Renewable Energy Development Agency (IREDA).

This fresh equity injection is expected to help generate approximately 10,200 jobs per year and reduce about 7.49 million tons of CO2 equivalent emissions per year.

The additional equity infusion will help IREDA lend ₹120 billion (~$1.61 billion) to the renewable energy sector, thus facilitating the debt requirement for an additional capacity of approximately 3,500-4,000 MW.

It will help the agency enhance its net worth, which will help in additional renewable energy financing.

Also, it will enable IREDA to improve the capital-to-risk weighted assets ratio (CRAR) to facilitate its lending and borrowing operations. Higher CRAR indicates better capitalization.

IREDA plans to float an initial public offering (IPO) and issue green bonds in domestic and international markets to mobilize capital for lending. IREDA also plans to set up an alternate investment fund (AIF) to tap large institutional investors like debt funds, pension funds, insurance funds, and environmental, social, and governance (ESG) funds.

IREDA had posted a profit after tax of ₹3.46 billion (~$47.75 million) in FY 2021 against ₹2.1 billion (~$29.67 million) in FY 2020, registering a massive growth of 61%. IREDA had earned ₹274.1 million (~$3.77 million) as revenue from solar sector operations in FY 2020-21.

The financial institution spearheading the government’s initiative to expand renewable energy generation and component manufacturing has signed a memorandum of understanding with the Ministry of New and Renewable Energy to set key targets for 2020-21. For IREDA, the Government of India had set a revenue target of ₹24.06 billion (~$323.39 million) for FY 2020-21. Against this target, IREDA posted total revenue of ₹26.13 billion (~$360.12 million) in FY 2020-21.

The loan book of IREDA has grown from ₹235.48 billion (~$3.24 billion) as of March 31, 2020, to ₹278.54 billion (~$3.83 billion) as of March 31, 2021. The loan disbursement of ₹88.27 billion (~$1.21 billion) is the second-highest in the company’s history.

IREDA is also responsible for the 5 GW of grid-connected solar projects under the Central Public Sector Undertaking Program. The auction for these projects was concluded in September 2021.

IREDA is also implementing the program for setting up manufacturing capacities of vertically integrated high-efficiency solar modules under the production-linked incentive (PLI) program. In the auction, IREDA announced PLI totaling ₹44.50 billion (~$597.98 million) for a total capacity of 10,483 MW.