IREDA Stock Price: Will It Go Higher or Collapse ?
TLDRThe video discusses the Indian government's initiative to promote renewable energy, highlighting the role of the Indian Renewable Energy Development Agency (IREDA) in funding various sectors like solar, wind, and hydro. It also touches on the company's impressive revenue growth and profit margins, despite the industry's competitive nature. The video emphasizes the importance of thorough financial analysis when investing in companies, especially in the renewable energy sector, and the need for investors to evaluate the sustainability of growth and valuations in the context of government policies and market competition.
Takeaways
- 📉 The company's IPO price was ₹332, which drastically fell to around ₹10 per share post-listing.
- 💡 The question of the company's sustainability arises due to the significant drop in share price.
- 🌐 India's initiative in renewable energy started in 1970s after the oil crisis, being the first country to establish a department for non-conventional energy sources.
- 🚀 The Indian government's push for renewable energy is driven by an ambitious goal to meet 50% of its power requirements from renewable sources by 2030.
- 💰 The role of the Indian Renewable Energy Development Agency (IREDA) is to provide funding for various renewable energy sectors like solar, wind, and biomass.
- 🏦 IREDA, apart from funding projects, also offers loans to private players in the renewable energy sector, indicating a competitive landscape.
- 📈 The company's revenue growth and profit margins have shown a significant increase over the past few years, but the sustainability of this growth is under scrutiny.
- 📊 The financial analysis of the company reveals that while the revenue and profit growth are impressive, the valuation may not be sustainable in the long term.
- 🔄 The company's balance sheet has improved, with reduced debt and increased margins, but the future sustainability of these improvements is uncertain.
- 🌱 The focus on the renewable energy sector is a hot theme, driving interest and investment in related stocks, but it's important to analyze each company's fundamentals.
- 📝 For new investors, it's crucial to assess a company's valuation and financial health before investing, considering the competitive industry and potential for sustainable growth.
Q & A
What was the issue with the company's IPO price and its subsequent share price performance?
-The company's IPO price was ₹332, which was significantly higher than its listing price, which exceeded 100%. However, the share price did not maintain this level and dropped to around ₹10, indicating a lack of stability and raising questions about the company's future growth and whether it was a bubble.
What was the purpose behind starting the Indian Renewable Energy Development Agency (IREDA)?
-IREDA was initiated to address India's dependence on oil, especially after the 1970s oil crisis, which impacted the country significantly. The goal was to develop alternative energy sources, like coal, and eventually focus on renewable energy development, making India one of the first countries to establish a department for non-conventional energy sources.
How does IREDA fund renewable energy projects?
-IREDA provides funding for various sectors within the renewable energy industry, including solar, wind, and biomass projects. It aims to support the growth of renewable energy and reduce dependence on non-renewable sources.
Is IREDA the only financial institution that can fund renewable energy projects in India?
-No, IREDA is not the only institution. Other financial entities like Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) also provide funding for renewable energy projects, although their focus on renewable energy through their share is comparatively less than IREDA.
What are the differences between IREDA and IFCI in terms of lending and their models?
-While IREDA specifically lends to Indian Railways and is the only entity to do so, IFCI follows a general model with a zero default policy. IREDA, on the other hand, also lends to many private players without government guarantees, which poses a risk of default that could impact IREDA's financial health.
What is the current status of IREDA's NPA and its implications?
-In 2021, IREDA's gross NPA was above 8%, which is considered high. It was later brought under control, but this indicates that lending to private players without government guarantees can lead to higher risks of default for IREDA.
How does one analyze a company's financial health and decide on investment?
-A company's financial health is analyzed using various financial ratios and metrics, focusing on aspects like revenue growth, profit margins, balance sheet clarity, and default rates. Fundamental analysis courses, like the one mentioned in the script, provide step-by-step methods for beginners to analyze any company effectively.
Why is there a bullish trend in renewable energy stocks in India?
-India has an ambitious goal of fulfilling 50% of its power requirements through renewable energy by 2030. This has led to a push for renewable energy-related stocks, which are focused on sectors like solar power, electronics, green technology, and energy storage, resulting in a bullish trend.
What are the concerns regarding the sustainability of growth in PSU (Public Sector Undertaking) companies?
-While PSU companies are growing rapidly, it's important to question whether this growth is sustainable. Factors like revenue growth, profit margins, and competition within the industry must be considered. Additionally, the valuation of these companies should be assessed to determine if they are overvalued.
How does the company's revenue growth and profit margins impact its valuation?
-The company's valuation is significantly influenced by its revenue growth and profit margins. If the company's compounded annual growth rate (CAGR) for revenue is high and profit margins are increasing, it may indicate a sustainable valuation. However, if the growth plateaus or does not align with profit margins, the current valuation may not be sustainable.
What should new investors consider before investing in a company based on its past share price performance?
-New investors should not solely rely on past share price performance. They should evaluate the company's valuation, revenue growth, profit margins, and the overall competition within the industry before making an investment decision.
Outlines
📉 IPO Pricing and Market Performance
The paragraph discusses an IPO of a government company with an issue price of ₹332 that opened above the listing price by 100%. However, the share price is currently trading near ₹10, indicating a significant drop from the IPO price. The speaker raises concerns about the sustainability of the company's growth and whether it is a bubble. The speaker intends to analyze the company further in the video and also discuss whether the general public's comparison of the company with IRFC is appropriate.
🌱 India's Focus on Renewable Energy
The paragraph highlights India's proactive approach to renewable energy development, starting with the establishment of a commission in 1970 and the creation of the Ministry of Non-Conventional Energy Sources in 1982, which was later renamed the Ministry of New and Renewable Energy. The speaker emphasizes India's early recognition of the need for reducing oil dependence, especially after the oil crisis in the 1970s, and the country's efforts to develop renewable energy sources such as coal and lignite. The paragraph also touches on the role of the Indian Renewable Energy Development Agency (IREDA) in funding various renewable energy sectors and the competition in the sector, including private and government companies.
Mindmap
Keywords
💡Initial Public Offering (IPO)
💡Share Price
💡Growth Sustainability
💡Oil Crisis
💡Renewable Energy
💡Indian Renewable Energy Development Agency (IREDA)
💡Power Finance Corporation (PFC) and REC Limited
💡Non-Performing Assets (NPA)
💡Financial Analysis
💡Investment Decisions
💡Renewable Energy Sector
💡Monopoly
Highlights
The government company's IPO issue price was ₹332, which was listed at more than 100%.
The company's share price did not stop at the listing and is currently running at around ₹10.
The question arises whether this growth is sustainable or if it is just a bubble.
The video emphasizes the importance of watching it till the end to understand all aspects clearly.
India's biggest oil crisis happened in 1970, leading to the establishment of the Indian Oil Corporation.
India learned from the crisis to reduce dependence on oil and started working on coal.
India was the first country in the world to establish a department for non-conventional energy sources in 1982.
IRDA's role was to fund various renewable energy sectors like solar, wind, and biomass.
Apart from IRDA, other entities like PFC (Power Finance Corporation) also fund renewable energy projects.
There is competition in the field, and no single entity has a monopoly over funding renewable energy projects.
The company's NPA (Non-Performing Asset) situation has improved, with a clear balance sheet and increased margins.
The company's revenue growth has been compounded annually at 14% over the last four years.
Profit growth has also been significant, with a compounded annual growth rate of 59% over the last three years.
The company's valuation needs to be sustained, and it should grow at least 25-27% from the next year.
The industry's P/E ratio is around 14, while the company's P/E ratio is 34, indicating it is overvalued.
There is no monopoly for the company, and many players are in the industry, so one cannot assign too much special P/E to it.
New investors should reassess the company's valuation before investing based on past share prices.
The PSU (Public Sector Undertaking) companies like PFC and REC are also focusing on the renewable energy sector.
The growth in the renewable energy sector is a key driver for the bullish sentiment in related stocks.
The company's future growth and valuation sustainability depend on its ability to increase revenue and profit margins.
The video will discuss the PSU bubble and why PSU stocks are rising so quickly in detail in the next video.