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IREDA (CMP - ₹162, Mcap - ₹45,425 crore, Target - ₹200, Buy)

ICICIdirect Research 11 Jul 2025 DISCLAIMER

IREDA reported steady performance on AUM momentum in Q1FY26, however, elevated credit cost dented profitability. AUM stood at ₹79,941 crore, registering 26% YoY and 4.7% QoQ growth, led by continued focus on renewable sector.

Operationally, Net interest margin (NIM) improved to 3.6% (up ~30 bps QoQ/YoY), supported by ~20 bps sequential decline in cost of borrowings to 7.4%.

However, net profit came in at ₹247 crore, down 36% YoY, largely impacted by elevated credit cost of ₹363 crore (vs ₹129 crore in Q4FY25) on account of elevated slippages which included one legacy account (₹783 crore) being classified as NPA due to a recent court order. Consequently, GNPA and NNPA rose to 4.1% and 2.1% respectively. 

While business momentum was healthy, higher accretion of NPA remains a concern. Excluding downgrade of one legacy account, slippages remained higher (~3.3% run rate on annualised basis) which remains a concern.
Given long term growth opportunity in renewable financing, steady operational performance, approval of issuance of bonds under 54EC (enabling borrowing at competitive cost) bodes well for sustained delivery of business growth and RoA. Recent hiccups in terms of slippage of one account and resultant impact is expected to remain one-off and factored in the valuation. Thus, we continue to remain positive on the stock from long term perspective.

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