IREDA Plans FPO to Bolster Growth

Context

Indian Renewable Energy Development Agency (IREDA) is planning to launch a follow-on public offering (FPO) amid rising financing opportunities in the energy transition space and to bolster the company’s growth.

IREDA Plans Follow-On Public Offering (FPO) to Boost Growth amid Rising Renewable Energy Opportunities

• Recently, the company set up a wholly-owned subsidiary IREDA Global Green Energy Finance IFSC Ltd, at the International Financial Services Centre (IFSC), GIFT City, Gujarat. 
• Last month it also got the Navratna status.
• Ireda launched its Initial Public Offering (IPO) in December 2023.
• The net worth of the Ireda grew 44.2% over the last financial year to reach Rs 8,559.43 crore, as of March 31, 2024. 
• It is aiming to raise Rs 24,200 crore in this financial year.
• It is currently the only public sector NBFC focused on the green energy sector.

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About Follow on Public Offering (FPO)

• Refers: FPO is the way by which a company that is already listed on a stock exchange can raise funds from the public. 
  • FPOs are also known as secondary offerings.
• Types of FPO: Depending on how ownership is being given to new subscribers, FPO is classified into two types- a Diluted FPO or a Non-Diluted FPO.

Reasons for the Company to Bring its Public Offering (FPO)

• For Expansion: A company can use FPO to raise funds to finance its expansion plans and future projects.
• To Reduce Debt: If a company is overleveraged, it can decide to reduce its debt using the funds raised through FPO.
  • However, these two needs will be met only when the raised funds are coming in hands of the company. This happens in the case of Diluted FPO. 
• Increase the Public Shareholding: One of the primary reasons for having a Non-diluted FPO is when a company wants to increase the public shareholding in the company. A higher public shareholding facilitates greater public participation, which in turn leads to better price discovery of the shares.
  • In the case of Non-diluted FPO, the funds raised are distributed to the existing shareholders selling their shares.

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