IREDA: Renewable Energy Powerhouse

Well, valuation is the ultimate king in equity market. Market may support insanity in the short term but in the long run valuations always revert to the sector mean for majority of the stocks. The stocks that trade above the sector mean typically have something special about them such as extraordinary growth potential, very high quality management with outstanding and consistent track record of execution and some kind of moat.

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Below is MSCI index rejig from this news article >MSCI Feb review: NMDC, PNB added to Global Standard Index. Here are the other changes - BusinessToday

  • MSCI Domestic Indexes:
    • Large-cap additions: Tata Motors, Macrotech Developers
    • Mid-cap additions: Punjab National Bank, Canara Bank**
    • Small-cap to mid-cap upgrades: BHEL, Persistent Systems, MRF, Suzlon Energy, Cummins India** Kirloskar, Embassy Office Park REIT**
  • MSCI Emerging Markets Small Cap Index:
    • Indian Renewable Energy Development Agency added
    • GMR Airports Infra moved to mid-cap
    • Deletions: Prestige Estates Project, Rail Vikas Nigam
  • MSCI India Domestic Large Cap Index:
    • Additions: Trent, Tata Consumer Products, Power Finance, REC, Tata Power, Macrotech Developers, Tata Motors
  • MSCI India Domestic Small Cap Index:
    • Additions: IREDA, Vedant Fashions, Honasa Consumer, Cello World, Swan Energy, Paisalo Digital, Rattanindia Power, ITD Cementation India, Jaiprakash Associates, KPI Green Energy
    • Deletions: Persistent Systems, Suzlon Energy, Cummins India Kirloskar, MRF, BHEL, Oberoi Realty, Solar Industries India, Prestige Estates Project, Oracle Financial Services Software, L&T Technology Services

A news article here >MSCI Rejig: India May See $1 Billion Inflow; Mamaearth, IREDA May Get Added To Small-Cap Index
says IREDA’s expected inflow is USD 12 Mil.

The MSCI index rejig will come into effect from market close on February 29.

On February 8, its aid it has received approval from the Reserve Bank of India (RBI) to set up a wholly owned subsidiary in the International Financial Services Centre (IFSC) situated in GIFT City in Gujarat. (This might be only a good PR)

With these news , What may change to the story of IREDA, what could be timeline one can look at if one is to add IREDA ?

D-Invested.

All these developments notwithstanding, the best time to add Ireda would be when it corrects another 30-50% from here (it has already corrected 25% from the top). If you are buying a financial services company at 7-8x price to book and hoping to make returns you need to be extremely lucky.

Bajaj Fin, a gold standard in NBFC space, was trading at 10 p/b in October 2021. Stock has since been in a time correction giving negative return. Same goes for Kotak or HDFC bank. Nothing wrong with their fundamentals or earning performances. It’s just that their stocks ended up on wrong side of the valuations.

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so i was watching development through out day today…IREDA changed course but it didnt offer any chance to add…it simply shot to UC …what can we read in this sudden change of course ?

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Last 3 days , there were no buyers. Today morning again no buyers. Today afternoon , there are no sellers- only buyers
so everybody was on wait and watch mood.

My take is that, some PSU stocks had very bad Q3- so all were beaten down - both good and bad.
Now those bad guys recovered back in spite of bad Q3
market perhaps realised that the long term PSU story is in tact discounting Mr Mrodi’s return and hence policy continuance. All said and done , IREDA had a very good Q3 and there is no reason why it should not bounce back.

in my view, the volatility in PSU stocks may continue until the election results are out. and Those who are involved in trading need to exercise caution.

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At the end of the day it is a lender, why should it be 5x its networth when a bank like HDFC trades at half that valuation. I know there is a difference between NBFC and a bank…but still…valuations are obscene for a PSU lender.

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Possibly more of momentum and sentimental trading, and less driven by valuations. We can either ride the momentum, ofcourse, with caution, or if the model does not fit to our investment style, then stay away…

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So retail investors are absorbing all this sell-off from people much smarter than most of us?

Fact ?

Exactly. But currently everyone in the market is along for a ride ignoring valuations, fundamentals, common sense… let the party continue.

From my observation, small retail investors usually exhibit two key behaviors.
1- Chasing momentum, buying the stocks at their peak valuations
2- Buying stocks when they massively correct from their insane valuations

Sometimes 2 is often a direct result of 1.

So no wonder you see a massive surge in retail ownerships like Yes bank and I’m sure we’ll see something similar in Paytm in the next couple of quarters.

Don’t forget that Smallcap Mutual funds and Index funds are also retail. They have to keep buying.

They are institutional investors and their shareholding is reported in DII category. Retail investors is general public.

Yes I know that :sweat_smile:. My point is that ignore the funds which are buying due to it being part of an Index, or part of the PSU sector (PSU theme funds). People are doing SIP/lumpsum in those funds in heavy number, and the fund manager has no other option but to buy. They have already crossed allocation in TREPS, free cash etc and they will need to continue buying the company.

Look at HNI’s, Ace investors, FII in smallcaps.

They aren’t buying, they are selling.

Shocking indeed. Also may I ask which website UI is this?

Trendlyne i guess

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It is Rupeevest website.

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@varunkbhat got it right.

Thanks @varunkbhat @Mohit_baid
Looks like SBI PSU Fund absorbed the selling.
Also IREDA got included to MSCI Smallcap Index India. That could further support the stock price through foreign fund inflows, as well others buying considering that.

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Pls take a look at below excel data.
it seems,SBI didnt absorb, it added merely 5% of total they all sold in january.
Combined share count of ~12 crore in November to ~6 crore in January…they sold about 50% if we consider them as a group.
In order to know where this 6 crore shares went.We may only know after analysing recent bulk deals/data in February, if at all we can.

Diff. January Diff. December November
Nippon India Small Cap Fund(G) Samir Rachh 0 7031100 -1669155 7031100 8700255
SBI Banking & Financial Services Fund-Reg(G) Milind Agrawal 0 5077940 -5370039 5077940 10447979
HDFC Business Cycle Fund-Reg(G) Rahul Baijal 0 5021685 0 5021685 5021685
Nippon India Value Fund(G) Dhrumil Shah -1200000 4966910 -6000000 6166910 12166910
Aditya Birla SL PSU Equity Fund-Reg(G) Dhaval Gala -500000 4924800 -3950000 5424800 9374800
HDFC Multi Cap Fund-Reg(G) Gopal Agrawal 0 4687400 0 4687400 4687400
SBI PSU Fund-Reg(G) Richard Dsouza 3200000 3200000 0 0 0
DSP Equity Opportunities Fund-Reg(G) Rohit Singhania 0 2707100 0 2707100 2707100
Kotak Flexicap Fund(G) Harsha Upadhyaya 0 2466980 -624408 2466980 3091388
Kotak Equity Opp Fund(G) Harsha Upadhyaya 0 2466980 -374642 2466980 2841622
ICICI Pru Midcap Fund(G) Lalit Kumar -160000 2345753 -2182107 2505753 4687860
UTI Banking and Financial Services Fund-Reg(G) Preethi R S 0 2343930 -2343930 2343930 4687860
ICICI Pru PSU Equity Fund-Reg(G) Mittul Kalawadia 0 2343700 -2343700 2343700 4687400
Baroda BNP Paribas Large & Mid Cap Fund-Reg(G) Sanjay Chawla -363120 2200000 -41725 2563120 2604845
DSP ELSS Tax Saver Fund-Reg(G) Rohit Singhania -1771460 1771460 0 3542920 3542920
LIC MF Large & Midcap Fund-Reg(G) Yogesh Patil -579757 1562620 -982863 2142377 3125240
Bandhan Small Cap Fund-Reg(G) Manish Gunwani -420000 1173700 -1188150 1593700 2781850
Nippon India Banking & Financial Services Fund(G) Vinay Sharma 0 1172080 0 1172080 1172080
Bandhan Financial Services Fund-Reg(G) Sumit Agrawal 0 1172080 -1172080 1172080 2344160
Sundaram Multi Cap Fund(G) Sudhir Kedia -69977 1036243 -425183 1106220 1531403
Nippon India Power & Infra Fund(G) Sanjay Doshi -1000000 1000000 -1505905 2000000 3505905
Kotak Multicap Fund-Reg(G) Harsha Upadhyaya -822250 822250 0 1644500 1644500
Kotak ELSS Tax Saver Fund(G) Harsha Upadhyaya 0 822020 0 822020 822020
WOC Mid Cap Fund-Reg(G) Ramesh Mantri 0 819260 -818800 819260 1638060
Sundaram Mid Cap Fund-Reg(G) S. Bharath -21890 703110 -1015800 725000 1740800
WOC Multi Cap Fund-Reg(G) Ramesh Mantri 0 460200 -459800 460200 920000
Kotak India EQ Contra Fund(G) Shibani Kurian -200000 294960 -49950 494960 544910
Kotak Business Cycle Fund-Reg(G) Harish Bihani -287730 287730 0 575460 575460
Kotak Pioneer Fund-Reg(G) Harish Bihani -287730 287730 0 575460 575460
Baroda BNP Paribas Banking and Fin Serv Fund-Reg(G) Sandeep Jain 0 281060 -281060 281060 562120
WOC Large Cap Fund-Reg(G) Ramesh Mantri 0 197220 -197000 197220 394220
Kotak Banking & Financial Services Fund-Reg(G) Shibani Kurian -164000 164900 -37462 328900 366362
Sundaram Infra Advantage Fund(G) Ashish Agarwal 0 164000 -190525 164000 354525
Kotak Infra & Eco Reform Fund(G) Nalin Rasik Bhatt 0 137364 0 137364 137364
WOC ELSS Tax Saver Fund-Reg(G) Ramesh Mantri 0 86580 -86380 86580 172960
Quantum Small Cap Fund-Reg(G) Chirag Mehta 0 62247 41699 62247 20548
Shriram Flexi Cap Fund-Reg(G) Deepak Ramaraju 0 33600 33600 33600 0
Shriram ELSS Tax Saver Fund-Reg(G) Deepak Ramaraju 15000 15000 0 0 0
LIC MF Banking & Financial Services Fund-Reg(G) Jaiprakash Toshniwal 0 0 -23961 0 23961
Mahindra Manulife Balanced Advantage Fund-Reg(G) Manish Lodha 0 0 -872175 0 872175
Mahindra Manulife Multi Cap Fund-Reg(G) Manish Lodha 0 0 -3526323 0 3526323
Mahindra Manulife Aggressive Hybrid Fund-Reg(G) Fatema Pacha 0 0 -41725 0 41725
Kotak Balanced Advantage Fund-Reg(G) Rohit Tandon 0 0 -624408 0 624408
Kotak Debt Hybrid Fund(G) Devender Singhal 0 0 -437080 0 437080
Kotak Equity Savings Fund(G) Devender Singhal 0 0 -999051 0 999051
Mahindra Manulife Small Cap Fund-Reg(G) Abhinav Khandelwal 0 0 -4198582 0 4198582
Baroda BNP Paribas Value Fund-Reg(G) Shiv Chanani 0 0 -333832 0 333832
Baroda BNP Paribas Small Cap Fund-Reg(G) Shiv Chanani 0 0 -417290 0 417290
Baroda BNP Paribas Equity Savings Fund-Reg(G) Pratish Krishnan 0 0 -62591 0 62591
Baroda BNP Paribas Balanced Advantage Fund-Reg(G) Sanjay Chawla 0 0 -417290 0 417290
Baroda BNP Paribas Conservative Hybrid Fund-Reg(G) Pratish Krishnan 0 0 -125183 0 125183
LIC MF Small Cap Fund(G) Yogesh Patil 0 0 -14876 0 14876
Edelweiss Large & Mid Cap Fund-Reg(G) Abhishek Gupta 0 0 -147419 0 147419
Edelweiss Multi Cap Fund-Reg(G) Trideep Bhattacharya 0 0 -83451 0 83451
Edelweiss Mid Cap Fund-Reg(G) Trideep Bhattacharya -271233 0 0 271233 271233
Edelweiss Flexi Cap Fund-Reg(G) Trideep Bhattacharya 0 0 -62591 0 62591
Edelweiss ELSS Tax saver Fund-Reg(G) Ashwani Agarwalla 0 0 -17812 0 17812
Edelweiss Recently Listed IPO Fund-Reg(G) Bhavesh Jain 0 0 -20865 0 20865
Total 6,63,11,692 7,12,15,839 11,68,77,709
Diff -5,05,66,017 -49,04,147 -4,56,61,870
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