![IREDA CMD Pradip Kumar Das](http://media.assettype.com/psuwatch%2F2023-04%2F7209125d-7386-40b6-b141-f33f5253ae4c%2FIREDA_CMD_Pradip_Kumar_Das_psu_watch.jpg?w=480&auto=format%2Ccompress&fit=max)
New Delhi: Indian Renewable Energy Development Agency (IREDA) has registered its highest-ever loan disbursements and sanctions in FY 2022-23. The PSU has disbursed loans of Rs 21,639 crore and sanctioned Rs 32,587 crore in the last financial year. In comparison to FY21, disbursements have grown by 145 percent and sanctions are up 196.21 percent. The growth in the size of the loan book is also accompanied by an NPA figure of 2 percent (Q3, FY23).
In an interview with PSU Watch, Pradip Kumar Das, Chairman and Managing Director (CMD) of this Miniratna, Category-I PSU, spoke about how he has managed to grow the loan book of the PSU almost three-fold over the last three financial years alone and the company’s plans for making emerging areas like e-mobility bankable. With a lean workforce strength of approximately 160, IREDA has brought in a number of measures in its work culture to optimise its performance, said the CMD.
In the current financial year, the PSU is looking forward to announcing an Initial Public Offer (IPO), which will be the first-of-its-kind in India as a government-owned non-banking finance company (NBFC) that is lending exclusively to the renewable energy sector will make its debut on the bourses.
Here are excerpts from the interview:
IREDA has just recorded its highest-ever disbursement and sanction of loans for the renewable energy (RE) sector. When you look back at the year, what has made this possible?
See, IREDA has been there for 36 years. And it is the only organisation which has been exclusively funding green energy. And when the commitment is coming from none other than the honorable Prime Minister himself to reach 500 GW RE target, so ultimately the largest responsibility lies on an organisation like IREDA to come up and live up to the expectations of the government of India and to ensure that at the global level, we are leading from the front. If you look at the RE growth globally, it is in the range of 8-8.5 percent. And in India, it is between 9-10 percent. And our growth rate is coming more than 20 percent. So this confirms that we are syncing our growth to the directions and the vision given by the government of India, the honourable Prime Minister (Narendra Modi) and the minister for power and new and renewable energy. When the opportunity is so huge, numbers have to happen.
For the last three years, we have been setting new benchmarks for ourselves. Of course, this year, 2022-23, has been fantastic with respect to sanctions and disbursements. But it is not only important that we have certain historic figures, but the way we achieve those figures is equally important.
Though this organisation has been existing for the last 36 years, but with the focus of the government on RE development, and with more than 100 percent commitment from each and every official of IREDA over the last three years, we have been able to attain these figures. Two things have been at play. Like I said, the commitment has come from none other than the honourable PM himself, which means that the demand size is assured. As an organisation, we need to augment the supply side of it. In a non-banking financial company, the demand will enable loan disbursements and sanctions. But at what cost? That is most important. We have attempted to reduce the borrowing cost and bring in lots of process improvements.
We are living in the era of digitisation and automation and IREDA has adopted it holistically. Now, we are gradually shifting towards complete integration with an IT platform on which the entire process and the business model will be present.
When we met at IEW, you had said that you were the first company to have disbursed loans to people during the COVID-19 pandemic without them having to visit your office at a time when physical movement was restricted.
Yes. We believe that every problem comes with an opportunity. And it all depends on how you make use of that opportunity. During the COVID-19 pandemic, which was the worst period in the global history, we had many learnings. We adapted these learnings immediately. I think around seven-eight loans have been sanctioned without borrowers having to physically visit our office. Except for one, I think disbursements have also started. Most of the borrowers are first-time borrowers to IREDA.
What changes were brought within the organisation to make this kind of growth possible?
We are trying to create a culture in the organisation that the workplace is for enjoyment. When you enjoy your work, you will not have boredom and frustration. We are an organisation of around 160-odd employees and a close-knit family.
We also have a formal feedback system in place through which we seek the views of each employee. I personally connect with each and every official, even outsourced employees of the organisation. Building this kind of team spirit is very robust in the organisation. We also have around 27 percent women employees. Out of the 16 major divisions and departments, 11 are led by women. We are a gender diverse organisation. And our work culture is quite healthy.
In addition to all this, we also hold quarterly stakeholder meets in which we call all our borrowers. And we take their input. What is happening in the sector? What are their concerns? And how it is impacting speedy RE development in the country? Within the broad framework of government guidelines and policy and procedures of IREDA, whatever could be captured in the best interest of RE development, we have always captured that.
So, we capture input from employees and we capture inputs from our stakeholders. Both these things have delivered results to us.
How do you think the 500 GW RE target announced by India has shaped up the opportunities coming up in the sector?
This commitment came from the honourable Prime Minister. But this is a commitment made by every citizen of this country. This is a commitment for enabling a quality life. So far, on average, 11-12 GW (of RE capacities) used to be bid out. In the last financial year, 16 GW has been done. Recently, the honourable MNRE Secretary (BS Bhalla) has announced that annually, 50 GW of bidding will be attempted. I am quite confident that the kind of commitment that is being shown by our ministry, we can achieve the 500 GW target even before 2030.
Your net NPA was around 2.03 percent in Q3 of FY23. What would be the current figure? And how have you managed to keep it at this level despite lending to several emerging businesses in the RE sector where risk is high?
I cannot at this point disclose our current NPA figure before publishing our financial results. But we are confident that we will bring it down further. Three years back, it was 7.8 percent. From there, we have come down to 2 percent. NPA reduction has two parts. One is because the size of our loan book has gone up. But we have also recovered around Rs 600-700 crore from old loan accounts. We had 92 NPA accounts. And it has come down to 65 now. We have held extensive discussions with these borrowers. And like our PM says, wherever there is a bonafide intent, support them. Wherever there is a malafide intent, punish them. And that’s what we have done.
When we met at IEW, you said that IREDA has brought down lending rates in the e-mobility space. Tell us more about it.
E-mobility is an emerging space. Last year, we supported 3,400 BluSmart e-cars — 3,000 in Delhi/NCR and 400 in Bangalore. If go back 8-9 months, when they were looking for financial support, they told us that no one was coming forward to support them. In any emerging segment, there is usually a huge amount of risk involved. And assessing that risk and having a proper risk mitigation plan in place is important for any NBFC working in this space. And since we are the oldest in this field and the only company to be working exclusively in this space, it is our responsibility to not just look at it from the point of view of profitability and financial viability but also from the point of view of social impact.
After a lot of deliberations, we structured their loans in a manner that the loans which were appearing to be non-bankable became the most bankable. The input we are receiving from the promoter is that it has worked out very well for them and there are many lenders now approaching them to lend. That is what’s most important — creating an atmosphere where lenders are stepping forward to invest in renewable energy. That is IREDA’s competency.
Similarly, when we looked at the e-rickshaw market, we found out that NBFCs are charging interest rates in the range of 28-30 percent because of the risk involved. The borrowers in this segment had only an Aadhaar card and a telephone number and probably no stability in their address. So, as a lender, you are exposed to a lot of risk here and you need to charge the risk premium, which was resulting in high lending rates. And the NBFCs or micro-finance companies lending in this space are very small. They do not have the capability to go to the market and borrow money at a cheaper cost. We, as a reputed lender in this space, have a good rating. We have been upgraded from AA+ outlook to AAA (stable) outlook by ICRA. Just like in e-cars, we worked as a team to come up with a model to mitigate the risks involved and we finally extended a line of credit to an NBFC that is already in the business and who has assured us that they will not be charging more than 18 percent. That is a major milestone.
From the point of view of the poorest in the economic value chain system — the e-rickshawala — if, for them, the interest cost is getting reduced by 50 percent, the financial burden on them becomes lighter. And their borrowing profile also improves.
In our borrowing cost, we have a thin margin. We do not want to make profit in this segment. Our intention is to only ensure that a little bit of the risk premium is captured. We have sanctioned Rs 50 crore in the e-rickshaw segment. Out of total sanctioned loans of Rs 32,600 crore, Rs 50 crore is nothing. But if you look at it from the socio-economic point of view, this Rs 50 crore is most crucial and satisfying for us. Once this model is successful, we will be working aggressively to expand this pan-India, which is the ultimate objective.
What are the emerging areas that you are planning to expand into in the current financial year?
In the emerging areas, we are looking to extend financing to the e-mobility space beyond e-vehicles. Like, charging infrastructure. Providing funding to e-vehicles alone will not do. You need to extend financing to charging infra and manufacturers as well. We have already sanctioned a couple of loans in the manufacturing space very recently and in the charging infra segment as well.
In the time to come, Green Hydrogen, Green Ammonia, Methanol, etc, are going to be game-changers. We have done a study and have found out that around USD 300 billion investment will be required for 500 GW RE installation. So, around USD 200 billion has been spent. And the balance, USD 300 billion is required. And that is going to be a huge market.
Most of the RE players in the country are going for forward integration. Also, most of these major RE players are already borrowers of IREDA. So, we will not have any problem in assessing the borrowers’ profiles. We will only need to assess the project profiles and the risk matrix and how best we can mitigate those risks. It is challenging. Apart from engaging our in-house resources, we will be engaging best consultants at the global level. BCG is already with us. And we will also reach out to more knowledge experts and consultants wherever required to assess and reduce the risk component.
IREDA has been planning to start financing in foreign currency. When is this expected to materialise?
During our stakeholder meets, some of our developers said that they were keen on setting up manufacturing base for Green Hydrogen and Green Ammonia abroad. And some who are even setting up these capacities in India are looking for foreign currency loans. We have already decided to set up a wholly-owned subsidiary in Gandhinagar’s Gift City, which will be classified as an overseas office and will enable us to raise and retain funds in foreign currency. This will allow natural hedging. Today, the hedging cost is more than 450 bps.
There are two parts to this. One is lending in foreign currency to domestic developers. Then there is also demand for lending for foreign projects. So, we are trying to attempt both through our Gift City office very soon. It is all subject to Niti Aayog’s permission and the RBI’s consent. But maybe in 2-3 months, we will be in a position to offer foreign currency loans.
IREDA is expected to launch an IPO this year. When can we expect an announcement and what is the size you are looking at?
We will go for a fresh issue of 15 percent of our existing paid-up capital. And the Central government will sell 10 percent of their share. Today, the government owns 90 percent share. So, roughly 25 percent will be available in the market. And the issue size is definitely going to be bigger. We are expecting the IPO to hit the market 5-6 months down the line. And since the size is larger now, we will approach the global market. We are planning to do plenty of domestic and international roadshows.
This IPO will be the first of its kind because for the first time, a company with 100 percent focus on the renewable energy sector will come into the market.
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