Pradip Kumar Das, Chairman & Managing Director, IREDA

19 Nov 2023 , 09:25 AM

As India’s largest pure play green financing NBFC, what have been the key achievements and learnings in the company’s journey so far?

Our biggest achievement is that we have proven to everyone that we have the competency and capability to transition the sector from emerging to established. When it comes to development of Renewable Energy (RE), so far it has largely been the domain of private players. After inclusion of large hydro into the definition of RE from November 2019 onwards, some of the central CPSEs are getting into the renewable space. Despite lending to the private sector, despite lending to the emerging and new technologies, we have ensured a very healthy loan book of Rs. 47,000 Crore as on date. In the last 36 years till September 2023, we have financed projects worth more than Rs. 1,07,000 Crore and our cumulative write off is hardly about Rs. 200 Crore. That is the kind of command and competency our company enjoys. We do our due diligence well, process the proposals efficiently and ensure fair amount of recovery. Very soon, we will be upgraded from Miniratna to Navratna, it is under process at the Government of India. Very soon, we are going to open an office in Gift City to further reduce our hedging cost where we can borrow and lend in foreign currency. 

Another major achievement is we have supported speedy development of RE in the country. Over the last 9 years, there has been rapid growth in RE development across the country. Vis-à-vis other developed economies, our growth rate is faster. In addition to developing faster, we are ensuring handholding to other under developed countries or developing economies for their RE development, especially in solar energy. 

What makes IREDA stand out?

Our approach to business is completely different from others, which makes us unique. We are not only lending to the RE developers, we are also doing handholding to develop the RE sector fastest. That is our motto.

With International Solar Alliance (ISA), for the first time, any international agency’s headquarter is located in India. Through that, India is supporting RE development in developing and under developed countries as well. 

Now, IREDA is one of the key organizations to be working with ISA right from its formation stage till date in various capacities. We not only finance RE projects but we really do the handholding. This has made us the most preferred lender in the RE space as on date, particularly in the construction stage of the project. Typically, in case of an RE project, especially solar, wind and hydro, projects are of very short gestation period. In case of solar and wind, it is 6 months to 1.5 years, and in case of hydro it is 2.5-3.5 years. Depending on the geographical location. And about 90% of the components are imported. Therefore, the project developers’ concern is how best does the lender understand their business, how best can the lender finance them with a committed timeline approach so that they honor their international commitments in a timely manner.

In the construction stage, more than interest rate, the developers’ main focus is on understanding the sector and securing committed finance with a dotted timeline. We are experts in that. Our project proposal processing as on date is much quicker than others. We have a very robust review and monitoring mechanism in place.

As on March 31, 2023, 62% of our loan book came from traditional RE (wind, solar and hydro). 80% of our generation projects are commissioned assets which require lesser provisioning. So our loan book profile is quite healthy today which is resulting in lesser provision coverage ratio of 48% against 70% PCR of our peers who are largely into financing of thermal energy projects.

A key concern of investors has been the limitations in terms of decision making at the management level in public sector companies. How is the company addressing these investor concerns?

I have worked in 2 private sector companies and 6 government sector companies so far. During my 3.5 years of experience in IREDA, I did not find any interference by government in our working. Our board is fully independent and this is reflected in our best quality corporate governance practices. We publish our fully audited results every quarter since more than 2 years. We are the quickest in publishing quarterly results as well as in conducting our AGM. This year, we did our AGM in 90 days against the regulatory timeline of 180 days. Last 3 years, there have been no major observations in RBI’s inspection reports on our company. We are confident of achieving that this year as well. Being an unlisted entity has not deterred us from following best-in-class corporate governance practices. This in turn helps us ensure highest quality of credit rating so that we can borrow from the market at the minimum rate and lend to the borrowers at fairly competitive rates.

Share with us overview of the opportunity landscape for the company.

Future business is going to come from new and emerging renewable. India has a target of 500 GW RE by 2030. We have to have additional GW of at least 320 and on. For this, we require Rs. 30 Lakh Crore of investment roughly. Typical debt-equity ratio is 75-25, so Rs. 24 Lakh Crore debt is required. Half of this typically comes from NBFCs. So, Rs. 12 Lakh Crore is likely to come from IREDA, REC, PFC and other government NBFCs. Last 3 years because of COVID we have been borrowing more from the domestic sources. Our 3 year borrowing composition 57% was forex and 43% was domestic. Today, it is 25% forex and 75% domestic. So in the domestic market we can raise capital at very competitive rates. And we pass on the benefits to our borrowers. That is the trust we have built in the last 3 years, by standing with them during the COVID time when there was a dire need. That has resulted in both growth of our loan book and reduction in NPAs. We are well placed to maximize these opportunities.

What is the growth strategy of the company?

We are confident of supporting the RE sector and we will be fully leveraging our book, post the IPO. Beyond our exposure limit in case of large ticket loans, we will be undertaking joint financing with others. We have signed MOU with 4 banks (BoI, BoB, BoM and Union Bank) and IIFCL. Another couple of banks are also in the pipeline. We do not want to breach RBI norms on exposure, hence the tie-ups.

March 2020 onwards, we have focused more on qualitative improvement in governance, process redundancy, speed and accuracy of processing and capturing the risks and mitigating it and loading the risk premium properly in the interest so that our loan does not become bad. In last 3 years, we do not have much additional NPAs. Today our net NPA is 1.65%. There is a significant amount of uniqueness which will sustain. We are confident of leveraging our equity and borrowing. Our focus is on maintaining best quality corporate governance practices and speedy development of RE in the country.  

The company’s asset quality has seen a sharp improvement in recent times, what are the factors driving this improvement?

Right now, our net NPA is 1.65% and it has come down from 7.18% in March 2020 when our loan book was about Rs. 23,000 Crore and our net worth was around Rs. 2,400 Crore. In 3 years, we have added Rs. 24,000 Crore to our loan book and in the same time frame, we have been upgraded from Schedule B to Schedule A. Six months back, our credit rating was upgraded from AA+ to AAA stable.

3 years back, we introduced review of every project loan account on a monthly basis and on quarterly basis with the borrowers.  Every quarter, we do all borrower meets wherein we educate our borrowers and create a fair amount of awareness for best quality corporate governance among our borrowers, which is enabling them to sustain their rating or further improve it so that they can also borrow from us at lower rates.

Does the company have a dividend distribution policy? If yes, please provide an overview.

Considering the exponential business opportunity ahead of us, as an investor GoI found it prudent to plough back capital in the company and go ahead with divestment. Government is very clear. 5% Networth or 30% PAT whichever is higher, dividend is to be paid compulsorily by public sector companies. But in our case for 4 years they have considered the growth needs of our company. Post IPO, we leave it to government as well as to the investors to make this decision.