Posted on February 28, 2025, by Niftynews
IREDA Shares (Indian Renewable Energy Development Agency), the government-backed company focused on financing renewable energy projects, saw a significant drop of over 7% on February 28, 2025, following its entry into the Futures & Options (F&O) segment with the start of the March series. The stock fell to ₹154, continuing its decline after a strong run in the previous days, which had seen gains in four out of the last five sessions.
This sharp decline marks another difficult chapter for IREDA stock, which has now fallen 50% from its peak of ₹310, recorded shortly after its post-listing debut on July 15, 2023. Over the month of February alone, the stock has lost more than 20%, marking its steepest monthly decline since its listing in December 2023. The stock’s poor performance continues after a 6% drop in January 2025.
Why Did IREDA Shares Fall?
IREDA’s entry into the F&O segment has created a volatile environment for its stock. The addition of futures and options contracts to the stock market brings in new speculative activity, and market participants often react strongly to the shift. Historically, stocks entering F&O segments experience increased volatility, especially if traders and investors are uncertain about the stock’s performance in this new market dynamic.
Moreover, the market sentiment has been weak due to global economic uncertainty and sector-specific headwinds that are putting pressure on stocks like IREDA, despite its robust financial performance.
IREDA Financial Performance: A Silver Lining
Despite the recent slump in its stock price, IREDA has posted strong Q3 results for FY25, signaling that its fundamentals remain strong. The company reported a 27% year-on-year increase in net profit, which reached ₹425 crore, driven by a 36% increase in revenue to ₹1,698 crore. This performance is noteworthy, especially when considering the challenges in the broader economic environment.
Further, IREDA’s cost of borrowing has improved significantly, declining from 7.82% last year to 7.68%, which will help the company manage its financing costs more efficiently. The company’s net interest margin expanded to 3.33%, further boosting profitability.
NPA Improvement
IREDA’s gross non-performing assets (NPAs) also showed a marked improvement, decreasing from 2.90% to 2.68% year-on-year, reflecting better asset quality and improved loan repayment collections. These metrics are positive signs for long-term growth, particularly in a market that is still recovering from the impacts of the pandemic.
IREDA Fundraising Efforts: QIP Approval
Recently, IREDA shareholders approved a plan to raise ₹5,000 crore through a Qualified Institutional Placement (QIP). This move is seen as an effort to strengthen the company’s balance sheet and fund its growth, especially in light of its Navratna status, which was granted recently. The QIP will involve the dilution of the government’s stake by up to 7% post-issuance.
The QIP approval is seen as a positive for IREDA, as it will give the company access to fresh capital to fund its expansion and renewable energy financing. However, the stake dilution could be a concern for some investors, as it will reduce the government’s overall holding in the company.
Outlook for IREDA Shares
Despite the recent slump in IREDA stock price, there are positive long-term fundamentals at play. The company’s strong Q3 performance, coupled with the improvement in cost of borrowing and the reduction in NPAs, indicates that IREDA remains a key player in India’s renewable energy financing sector.
Additionally, the QIP fundraise could provide the company with the capital needed to expand its operations, particularly in light of the growing demand for green energy projects in India. The government’s push towards renewable energy makes IREDA a critical part of India’s transition to a more sustainable energy future, which could result in future growth opportunities for the company.
The Risk Factor: F&O Entry
The entry of IREDA into the F&O segment is a double-edged sword. While it provides liquidity and enables more trading strategies for investors, it could also increase volatility in the short term. As traders react to the new F&O offerings, there may be significant fluctuations in IREDA stock price.
Conclusion: Is IREDA a Buy Now?
IREDA stock has faced a significant decline, losing 50% of its value since its peak in July 2023 and over 20% in February 2025. The entry into the F&O segment has added volatility to the stock, and while the company’s recent Q3 earnings are strong, concerns about short-term price swings remain.
However, the company’s financial health, the improvement in its NPA levels, and the QIP approval suggest that there may be substantial upside potential in the long term. Investors with a long-term horizon and a focus on sustainable energy might view this dip as an opportunity to enter at a lower price.
The ongoing challenges and volatility in the F&O market may affect short-term performance, but with India’s focus on renewable energy, IREDA role in this sector positions it as a strategic player for future growth.
Key Takeaways:
- IREDA shares fell 7% after entering the F&O segment, and the stock has lost 50% from its peak in 2023.
- The company recently reported a 27% increase in net profit and a 36% rise in revenue in Q3 FY25.
- Gross NPAs decreased from 2.90% to 2.68%, signaling better asset quality.
- Shareholders approved a ₹5,000 crore QIP to raise funds, which will dilute the government’s stake by up to 7%.
- Volatility in F&O could pose a risk in the short term, but IREDA remains a strong player in the renewable energy sector.
