IREDA Shareholders Approve ₹5,000 Crore Fundraise via QIP

Why in the NEWS?

• The shareholders of Indian Renewable Energy Development Agency Limited (IREDA) have approved the company's proposal to raise up to Rs 5,000 crore through QIP in one or more tranches.

Key Points:

• This amount will be raised by issuing equity shares in one or more stages.
• The proposal was approved in the 22nd Extraordinary General Meeting (EGM) held through video conferencing.
• Shareholders voted in favour of the proposal through remote e-voting in the meeting.
• Under this scheme, it was proposed to reduce the shareholding of the Government of India to 7% in one or more stages.

What will you read next in this topic?

• Benefits of capital raised from QIP:
• What is Qualified Institutions Placement (QIP)?
• What is Indian Renewable Energy Development Agency Ltd. (IREDA)?

Benefits of capital raised from QIP:

Increase in green financing capabilities:

• This funding will increase IREDA's ability to invest in renewable energy projects.
• Strengthening of financial resources will support more solar, wind, hydro and bioenergy projects.

Acceleration in expansion of loan book:

• The loan facilities provided by IREDA will increase, which will enable more companies and organizations to get funding for clean energy projects.

• This will also promote private and public investment in the renewable energy sector.

Support to India's clean energy goals:

• This capital will help in achieving the Government of India's target of developing 500 GW of non-fossil fuel based energy capacity by 2030.
• Acceleration in renewable energy projects will reduce carbon emissions in the country, which will help in tackling climate change.
• Energy access and stability will be ensured in rural and urban areas, which will also strengthen the country's energy security.

What is Qualified Institutions Placement (QIP)?

• Qualified Institutions Placement (QIP) is a method of raising capital by Indian companies by issuing equity shares or other securities directly to specific institutional investors (Qualified Institutional Buyers - QIBs).

Direct issuance to institutional investors:

• Only qualified institutional buyers (QIBs) are allowed to buy shares under QIP.
• QIBs include mutual funds, insurance companies, banks, venture capital firms and foreign portfolio investors (FPIs).

Process regulated by SEBI:

• The Securities and Exchange Board of India (SEBI) introduced QIP rules in 2006 to enable companies to not rely on overseas markets to raise capital.
• Under SEBI guidelines, there is no lengthy approval process for QIP, making it faster and simpler than other funding options.

Different from FPO and IPO:

• Unlike IPO (Initial Public Offering) and FPO (Follow-on Public Offering), QIP targets only institutional investors and is not available to retail investors.
• It has minimal regulatory requirements, making it an effective way for companies to raise funds quickly.

Beneficial for Indian companies:

• It gives companies an opportunity to raise capital without lengthy processes and additional costs.
• Capital raised through QIP can be used for business expansion, debt repayment, new projects and research and development.

What is Indian Renewable Energy Development Agency Ltd. (IREDA)?

• Indian Renewable Energy Development Agency Ltd. (IREDA) is a Public Sector Enterprise (PSU) under the Ministry of New and Renewable Energy (MNRE), Government of India.
• It is a premier institution dedicated to financing renewable energy and energy efficiency projects in India.

Objectives and Functions of IREDA:

• Financial assistance for renewable energy projects:
• Solar Energy
• Wind Energy
• Biomass & Biogas
• Small Hydro Power
• Hydrogen and other innovative technologies
• Green Financing:
• Providing loans to renewable energy companies at low interest rates.
• Obtaining green funds from international and domestic financial institutions.
• Participation in carbon credit and climate finance schemes.
• Policy Formulation and Research:
• Assist in implementing the green energy policies of the Government of India.
• Promoting research and innovation in the renewable energy sector.
• Operating schemes related to energy efficiency.

Key Achievements of IREDA:

• Established in the year 1987 – First dedicated institution for renewable energy financing in India.
• Financing more than 2000+ projects – Collaboration in solar, wind, biomass, hydropower etc.
• First Indian agency to issue green energy bonds – Received financial support from domestic and foreign investors.
• Launched IPO in 2023 – thereby becoming the first renewable energy finance company to be listed on the Indian stock market.

Future and Importance of IREDA:

• IREDA will play an important role in meeting the Government of India's net-zero carbon emissions target by 2070.
• Plan to increase investment in green hydrogen, offshore wind and electric vehicle (EV) infrastructure.
• Aims to further strengthen green financing at local and global levels.