The Indian government is looking to tap market opportunities to keep up the recent swift growth in the renewable energy sector.
The cabinet recently approved a decision to launch an Initial Public Offer for the Indian Renewable Energy Agency (IREDA). The agency is among the leasing lenders to renewable energy projects across India. It also administers the one of most important incentives available to the renewable energy market in India – generation-based incentive.
Funds raised from this exercise would likely be used to increase debt finance to renewable energy projects. IREDA recently announced that it will sanction loans worth Rs 13,000 crore ($2 billion) to renewable energy projects in FY2017-18.
By sanctioning this amount, IREDA will likely capture a fifth of the debt finance market for renewable energy projects in FY2017-18. Of the sanctioned amount, more than 60% will be disbursed within the financial year. The agency has already sanctioned a cumulative of Rs 37,000 crore ($5.66 billion) and has disbursed a total of Rs 28,000 crore ($4.28 billion). This translates into debt finance for 7,000 megawatts of capacity.
Loan sanctions by IREDA have grown from Rs 826 crore ($126 million) in 2007-08 to Rs 7,806 crore ($1.2 billion) in 2015-16 and is expected to cross Rs 10,000 crore ($1.5 billion) in the current financial year, 2016-17. Loan disbursements have also increased from Rs 553 crore ($81.5 million) in 2007-08 to Rs 4,257 crore ($651 million) and is expected to cross Rs 6,000 crore ($917 million) in 2016-17.
The move seems directed towards attracting more investors to the Indian renewable energy market. Over the last few months several foreign investors and project developers have entered India looking to capture a share in one of the world’s fastest growing renewable energy markets. The move will also likely strengthen the investor confidence and prepare the market for the next big move which has seen sharp reduction in tariffs in a very short period of time.
The Indian government has set very ambitious targets of 100 gigawatts solar and 60 gigawatts wind energy capacity operational by March 2022. To meet such huge targets the government has been looking at new and innovative methods of raising capital. Several public sector companies, including IREDA, have been directed to raise funds through green bonds. The government is also planning an equity fund directed at renewable energy projects to attract funding from large foreign investors.
With the recent boom in India’s renewable energy market and several large-scale companies setting up subsidiaries to take advantage of that boom, it is highly likely that more renewable energy companies would look at stock markets to raise funds.
ReNew Power Ventures Limited is believed to planning an IPO later this year. Renewable energy subsidiaries of listed companies including Adani Green Energy, Tata Power Solar and Hero Future Energies may also look at this route.