Indian Renewable Energy Development Agency Ltd (Ireda), a government-owned lender to green energy projects, has been struggling with bad loans for some time now. But its second-quarter earnings delivered some relief for its investors.
The lending agency saw provisions against non-performing assets (NPAs), or bad loans, drop sharply to ₹70 crore in July-September from ₹363 crore in the April-June quarter. Lenders such as banks and non-banking financial companies (NBFCs) are required to set aside or provision a certain amount to cover expected losses from bad loans.
A spike in NPAs in the first quarter had pulled down Ireda’s net profit by 36% year-on-year to ₹247 crore. However, its net profit in the September quarter (Q2) grew 42% to ₹549 crore.
Gross NPA in Q2 for the non-deposit taking Ireda rose ₹51 crore from the preceding three months. In Q1, its gross NPA had surged by ₹1,436 crore sequentially, affected by Ireda’s loans to Gensol Engineering Ltd turning bad, and Rs783 crore of loans from FY20 being classified as NPA.
In the September quarter, Ireda’s operating profit jumped 54% year-on-year to ₹776 crore, aided by a 29% growth in interest income and lower cost of borrowing, thanks to a 100 basis point (bps) cut in the Reserve Bank of India’s benchmark rate this year.
Net interest margin (NIM) stood at 3.72%, up 38 basis points year-on-year.
Renewable energy boost
Ireda is seeing significant increase in business activity as it focuses on projects adding renewable energy (RE) capacity.
In the first half of 2026-27 (April-September), domestic RE capacity addition stood at 23 GW, as per the Central Electricity Authority, against 29 GW and 19 GW in the previous two years.
This helped Ireda post a strong 31% year-on-year growth in its loan book, to ₹84,500 crore at the end of September. Growth over the next few quarters could be equally strong with loan sanctioned increasing by 86% during the quarter, against 29% and 27% in the previous two quarters.
“Sustained business growth, steady margins along with prudent credit cost is expected to keep return on assets (RoA) at about 1.9%,” ICICI Direct Research said in a 14 October report, projecting Ireda to record business growth of 26–28% in FY26–27.
Ballooning bad debt
Ireda, however, is not out of the woods yet. Its gross NPA at 3.97% is notably higher than 2.19% a year ago, although marginally lower than 4.13% in the first quarter of FY26.
Out of its ₹3,353 crore of gross NPA, ₹1,930 crore has been due for more than three years, reducing the chances of recovery.
Total provisions made against bad loans stands at only ₹1,726 crore, which means Ireda needs to recover 49% from its bad debt portfolio to keep its balance sheet unaffected—a tough task.
Given these challenges, the Ireda stock’s dismal performance is not surprising. Shares are down nearly 30% over the past year. The stock trades at 3 times its FY26 estimated book value, as per Bloomberg. and looks fairly priced. But re-rating depends on reduction in its bad loans.
