Introduction
Shares of Indian Renewable Energy
Development Agency Ltd. (IREDA) dropped nearly 5% on July 11, 2025, after the
company reported disappointing Q1 FY26 results post-market hours on Thursday.
The key concern for investors was the deterioration in asset quality,
with Gross Non-Performing Assets (GNPA) and Net NPAs rising sharply from the
previous quarter.
In this blog, we break down IREDA
Q1 performance in detail, understand what led to the asset quality issues, what this means for long-term investors, and whether the fall in share price presents a buying opportunity or a red flag.
Key Highlights of IREDA Q1 FY26 Results
| Metric | Q1 FY26 | Q4 FY25 | YoY Change | QoQ Change |
|---|---|---|---|---|
| Net Profit | ₹247 crore | ₹488 crore | ▼ 35% | ▼ 49% |
| Gross NPA (%) | 4.13% | 2.45% | ↑ | ↑ |
| Net NPA (%) | 2.06% | 1.35% | ↑ | ↑ |
| Stage 3 Assets | ₹3,302 crore | ₹1,864 crore | ↑ 77% | ↑ 77% |
| Provisions | ₹363 crore | ₹129 crore | ↑ 181% | ↑ 181% |
| Net Interest Income (NII) | ₹742 crore (est.) | ₹818 crore (est.) | ↑ 36% (YoY) | ▼ 9% (QoQ) |
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What Caused the Drop in IREDA Share Price?
The 5% intraday fall on Friday was
driven primarily by concerns about asset quality. Two major exposures turned
bad, significantly affecting the financials.
1.
Gensol Engineering Loan Turns NPA
IREDA recognized a ₹730 crore loan
given to Gensol Engineering as a Non-Performing Asset (NPA). This alone
contributed heavily to the jump in Gross NPAs.
2.
Stage II Asset Slips to NPA
Another borrower, with a ₹783 crore
exposure, slipped from Stage II (which signals early stress) to a full NPA.
This transition added further pressure on IREDA loan book.
Together, these two accounts added
nearly ₹1,513 crore in fresh NPAs in just one quarter.
What is Gross NPA and Why It Matters?
Gross NPA refers to loans where borrowers have stopped repaying for
over 90 days. It reflects the health of the lender's loan book.
- March 2025 GNPA:
2.45%
- June 2025 GNPA:
4.13%
A near 70% spike in GNPA in
just one quarter is alarming and signals a significant jump in loan defaults.
This creates a ripple effect on future earnings, investor confidence, and stock
valuation.
Sharp Fall in Net Profit: Why Did It Happen?
IREDA reported a net profit of ₹247
crore in Q1 FY26, down from ₹488 crore in Q4 FY25. That’s a drop of nearly 49%
QoQ and 35% YoY.
The
Key Reason: Rising Provisions
To cover potential losses from bad
loans, IREDA increased its provisioning from ₹129 crore last quarter to
₹363 crore this quarter—a jump of over 180%.
While this is a responsible
accounting move, it significantly eats into profitability and signals further
risks ahead.
What Went Well: A Look at the Positives
Despite the stress, IREDA Net
Interest Income (NII) saw a 36% YoY growth, indicating solid core
business operations. However, it declined 9% on a QoQ basis due to rising NPAs
and declining recoveries.
Also, the company has continued to
maintain a decent Capital Adequacy Ratio (CAR), ensuring compliance with
regulatory norms.
Stock Performance: IREDA’s Journey Post-IPO
IREDA was listed in November 2023
and saw a stellar debut, rallying as high as ₹310 per share. However, it has
since corrected significantly.
| Date | Price (₹) | Event |
|---|---|---|
| Listing Day | ₹60 | IPO listing |
| All-Time High | ₹310 | February 2024 surge |
| Current | ₹162.81 | After Q1 FY26 results |
| % Off High | ▼ 47% | Near 50% correction |
Management Commentary
While the management did not release
a detailed investor call transcript immediately post-results, sources suggest
that they:
- Acknowledge the stress, especially from large-ticket loans
- Are in the process of restructuring or
recovering stressed assets
- Remain committed to renewable energy lending and
policy support
What This Means for Retail Investors
Let’s look at three types of investors and what they should consider.
| Investor Type | Suggested Action |
|---|---|
| Long-Term Holder | Hold. Monitor NPA resolution. |
| Short-Term Trader | Avoid. Volatility expected. |
| Fresh Entrants | Wait. Better entry likely. |
The company operates in the renewable
energy financing space, which has long-term tailwinds. However, asset
quality deterioration can delay gains.
Fundamental Analysis of IREDA: Before and After Q1
| Parameter | Before Q1 FY26 | After Q1 FY26 |
|---|---|---|
| PE Ratio | ~20x | ~27x (est.) |
| Book Value (Approx.) | ₹42 | ₹40 (declined) |
| ROE | 18–20% | May decline short-term |
| Dividend Yield | 1.8% | No change |
Valuation is now slightly stretched
due to declining profits. However, the stock may become attractive again once
asset quality stabilizes.
Peer Comparison
| Company | GNPA (%) | Net Profit (Q1) | Stock Performance (YTD) |
|---|---|---|---|
| REC Ltd | 3.7% | ₹3,530 crore | +22% |
| PFC Ltd | 4.1% | ₹4,019 crore | +18% |
| IREDA | 4.13% | ₹247 crore | ▼20% |
Compared to its peers, IREDA now has
a similar NPA ratio but a much smaller profit base, which could hurt its
competitiveness if not addressed quickly.
Expert Opinions
“The rise in NPAs is concerning, but
the underlying lending theme renewables is still strong. We believe IREDA needs
better risk frameworks to manage credit quality.”
A Mumbai-based analyst at a brokerage firm
“A 5% dip might not be the end. With
over ₹1,500 crore in fresh NPAs, investors should tread carefully and avoid
bottom-fishing right now.”
Equity strategist, independent research firm
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What To Watch Ahead
- Recovery efforts
from Gensol Engineering and the Stage II borrower
- Q2 results
to see if stress continues
- Government policy moves in the renewable space
- Management commentary
in the next earnings call
Conclusion: Is the Fall a Red Flag or a Buying Opportunity?
IREDA Q1 FY26 results paint a
mixed picture. While core business growth remains decent, rising NPAs and a
sharp drop in profits are clear warnings. Retail investors should avoid hasty
decisions. If you're already holding the stock, monitor closely for
developments. For new investors, this could be a wait-and-watch phase
before taking any action.
FAQ
Q1:
Why did IREDA shares fall on July 11, 2025?
A:
The shares fell due to rising NPAs and a sharp decline in Q1 profit.
Q2:
What are IREDA biggest challenges right now?
A:
Asset quality issues, especially loans turning into NPAs worth over ₹1,500
crore.
Q3:
Is IREDA still a good long-term investment?
A:
The renewable lending space is strong, but short-term risks remain due to
rising defaults.
Q4:
Should I sell my IREDA shares now?
A:
If you’re a long-term investor, wait and monitor recovery actions. Short-term
traders may consider exiting.
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