IREDA IPO opens today: 20 key risks from RHP to consider before subscribing to issue
- IREDA IPO Opens Today- Indian Renewable Energy Development Agency IPO has opened for bidding and will close on Thursday, November 23. The price band has been fixed in the range of ₹30 to ₹32 per equity share of face value of ₹10.
Indian Renewable Energy Development Agency IPO (IREDA IPO) has opened today, (Tuesday, November 21), and closes on Thursday, November 23. The price band has been fixed in the range of ₹30 to ₹32 per equity share of face value of ₹10.
Some of the key risks highlighted by IREDA in its Red Herring Prospectus, or RHP, include-
1- IREDA's business and financial performance could suffer if it is unable to effectively manage the quality of its growing asset portfolio and control the level of our non -performing assets ("NPAs”)
2- Volatility in interest rates could adversely affect IREDA business, net interest income and net interest margin, which in turn would adversely affect business, results of operations and financial condition.
3. IREDA if unable to secure borrowings on commercially acceptable terms and at competitive rates, this could adversely affect its business, results of operations and financial condition.
4. Projects and schemes for generating electricity and energy through renewable sources like solar, wind, hydro, biomass, waste -to-energy and new and emerging technologies have inherent risks and, to the extent they materialize, could adversely affect its business, results of operations and financial condition.
5. The COVID 19 has had, and a similar pandemic could have, certain adverse effects on our business, operations, cash flows and financial condition.
6. IREDA’s credit ratings have been downgraded in the past. Any future downgrade in its credit ratings could adversely affect its business, results of operations and financial condition.
7. IREDA operates in a highly competitive environment and increased competition in lending to the RE sector, including to new and emerging technologies, could have a material adverse effect on our business, results of operations and financial condition.
8. IREDA level of indebtedness and the restrictive covenants in its borrowing agreements that they have with their lenders could adversely affect its ability to react to changes in its business environment, limit its flexibility in managing its business and maintaining the growth of its loan portfolio, which may in turn have a material adverse effect on its business, results of operations and financial condition.
9. Its business is entirely concentrated in, and dependent on, the Indian RE sector, which in general has many challenges and effective addressing of these risks are key to the growth of the sector. If risks in the sector are not managed effectively, the sector growth will suffer, and IREDA’s business and operations will in turn will also be adversely affected.
10.The RBI prudential norms are applicable to IREDA and if the level of non -performing assets in its loan portfolio was to increase, owing to changes to NPA classification norms or otherwise, its business, results of operations and financial condition would be adversely affected
11. The poor health of State DISCOMs may lead to delays in payments to RE projects that IREDA finances. This poses a risk which may adversely affect the repayment capability of its borrowers
12.Certain DISCOMs that purchase electricity from its borrowers and certain states have sought revision in the terms of their existing PPAs. A downward revision in the tariffs could negatively affect the cash flows and financial conditions of its borrowers and may affect their repayment capabilities.
13. There are outstanding litigations involving the company and any adverse outcome in any of these litigations may have an adverse impact on our business, results of operations and financial condition.
14. IREDA is exposed to fluctuations in foreign exchange rates, which in turn could adversely affect its results of operation and financial condition.
15. ff IREDA is unable to manage its growth effectively, its business, results of operations and financial condition could be adversely affected.
16. IREDA is subject to requirements, including capital adequacy requirements, imposed by the RBI. Any failure to meet these requirements or any change by the RBI in the regulatory regime for Government NBFCs, may adversely affect its business, results of operations and financial condition.
17. Any increase in contingent liabilities could have a material adverse effect on its business, results of operations and financial condition
18. Certain of its historical corporate records in connection with the allotment of our Equity Shares are not traceable. The company cannot assure that there will not be any imposition of penalty in the future in relation to these matters, which may impact its financial condition and reputation.
19. IREDA and its borrowers are required to comply with Government of India policies. IREDA may fail to obtain certain regulatory approvals in the ordinary course of our business in a timely manner or at all, or to comply with the terms and conditions of its existing regulatory approvals and licenses. In addition, its business is subject to periodic inspections by the RBI, and our non - compliance with observations made by the RBI during these inspections, or significant lapses identified by the RBI in course of inspections, could expose us to penalties and restrictions.
20. IREDA operates a 50 MW solar project in Kerala which may be subject to tariff changes by Kerala State Electricity Regulatory Commission (“KSERC”), which, among other factors, may adversely affect the viability of the project.
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