The government intention to list India's green bank – the Indian Renewable Energy Development Agency (IREDA) – is not likely to happen for at least a year as the public sector undertaking faces rough weather both at home and abroad.
Company officials say they want to wait for the market to stabilise before approaching the bourses, to ensure better valuation for the company.
The falling interest rates and the rise of competing clean energy financing by banks are threatening returns of the PSU back home. Besides, US President Donald Trump’s policies have raised the cost of hedging for IREDA.
Officials say the burden of Trump’s policy of closing down the American economy to encourage domestic manufacturing has been reflecting on the rupee. According to December 2016 rating of Moody's Investors Service, multilateral agencies accounted for around 55 per cent of IREDA's total borrowings as of March 31, 2016.
The rupee has depreciated 1.8 per cent over the past three months (since October 30, 2016), putting additional strain on IREDA, when it will have to repay the foreign sourced fund.
Currently, IREDA raises funds from international development agencies such as the German government-owned KfW and Asian Development Bank. IREDA also builds its corpus by issuing bonds for clean energy development projects. It hedges its borrowing in foreign currency denominated financial instruments.
As the Indian currency depreciates, IREDA will have to shell out more for hedging or have to pay back a much higher amount to its borrowers. But, this is just the tip of the iceberg for IREDA. Company officials told BusinessLine that Indian banks are eyeing to take over the loans disbursed by IREDA. Clean energy projects have assured offtake over a period of 25 years and banks are looking to take over these committed loan accounts.
A senior official said, “The banks are attempting to poach loan accounts buoyed by the prospects of assured returns. Banks are offering customers a lower interest rate from IREDA’s rate.”
The company reported consolidated assets of ₹13,200 crore (around $2.0 billion) in June last year. The takeover will allow faster repayment of debt, boosting IREDA’s immediate cash profile. This will, however, result in a loss of earning from interest that IREDA had estimated while disbursing the loans.
IREDA will thus earn less from the loans it disbursed and will have to pay back more to the international development financing institutions it borrowed from.