Sharp Selloff in IREDA Continues Amid Broader Market Weakness

Shares of Indian Renewable Energy Development Agency (IREDA) slumped over 7% to ₹154 on February 28, as the stock entered the Futures & Options (F&O) segment with the launch of the March derivatives series. The downturn follows a strong rally in the previous weeks, with gains recorded in four of the last five trading sessions.

Stock Performance: 50% Drop From Post-Listing Peak

IREDA stock has now plunged 50% from its post-listing all-time high of ₹310, which was reached on July 15, 2023.
The stock has been in a downward spiral for two consecutive months, losing over 20% in February alone, marking its steepest monthly decline since its listing in December 2023.
In January 2024, the stock had already declined by 6%, reflecting a broader correction in renewable energy stocks.

The sharp fall aligns with the overall market weakness, where broader indices have seen heavy sell-offs due to global trade tensions, interest rate concerns, and profit booking by institutional investors.

IREDA’s QIP Approval: Shareholder-Backed Fundraising Plan

Amidst the stock’s sharp correction, IREDA recently secured shareholder approval to raise ₹5,000 crore through a Qualified Institutional Placement (QIP).

This move will dilute the government’s stake by up to 7% post-issuance.
The funds raised will likely be utilized for business expansion, capital requirements, and scaling up investments in renewable energy projects.
The company also received approval to amend its Articles of Association, aligning its structure with its newly granted Navratna status.

Impact of F&O Inclusion on IREDA’s Volatility

The inclusion of IREDA in the F&O segment is a key factor behind the stock’s recent volatility.

Stocks entering the F&O segment often witness sharp price movements, as they become more liquid and open to short selling and speculative trading.
Analysts believe that the increased trading volume and derivatives exposure could result in higher fluctuations in the coming weeks.

IREDA’s Q3 FY25 Performance: Strong Growth in Revenue & Profitability

Despite the sharp correction in share price, IREDA’s financial performance remains strong, with a robust Q3 FY25 earnings report.

Net Profit: ₹425 crore, reflecting a 27% year-on-year increase.
Revenue: ₹1,698 crore, growing 36% YoY, driven by higher lending to renewable energy projects.
Cost of Borrowing: Declined to 7.68%, compared to 7.82% in the same quarter last year, improving profitability.
Net Interest Margin (NIM): Expanded to 3.33%, a significant improvement compared to previous quarters.
Total Expenses: Increased by 33.8% to ₹1,160.78 crore, primarily due to higher operational and financial costs.
Gross Non-Performing Assets (NPAs): Improved to 2.68%, down from 2.90% in Q3 FY24, indicating better asset quality and loan recovery performance.

Market Outlook: Will IREDA Regain Momentum?

While IREDA’s long-term fundamentals remain strong, its recent market correction highlights investor concerns regarding valuation, external market factors, and speculative trading pressures.

Highlighting Factors to Watch

Impact of QIP issuance on stock price: The dilution effect of ₹5,000 crore capital raising could weigh on near-term stock performance.
Broader market sentiment: If the market correction continues, IREDA may face further downside pressure.
Renewable energy sector outlook: Government policies and capital investments in the green energy sector will play a crucial role in the stock’s future trajectory.
Short-term volatility from F&O trading: Increased participation in derivatives markets may lead to price swings, but it also enhances liquidity and institutional participation.

At 2:00 PM, IREDA shares were trading at ₹156, down 6.85% for the day, reflecting continued selling pressure despite strong financial fundamentals.