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IREDA to raise Rs 1,500 crore via tax-free bonds next fiscal

According to reports, the government’s dedicated green energy financing institution, Indian Renewable Energy Development Agency (IREDA) is planning to raise Rs 1,500 crore next fiscal through issuance of tax-free bonds in order to support the Centre’s ambitious clean energy targets running into hundreds of gigawatts.

Over the next three years, the agency expects to lend Rs 14,000-16,000 crore, as much as what it has disbursed over the past 28 years of its existence, owing to the targets and the growing interest of investors in the clean energy business. “We have proposed raising Rs 1,500 crore through another tranche of tax-free bonds next fiscal.

Advantage to the subscriber of the bond is about 250%. I don’t know what size of tax-free bonds the government is going to allow. These are going to be termed ‘green bonds’ as the end use will be restricted to renewable sector,” IREDA’s chairman and managing director KS Popli told ET.

IREDA had come up with a similar tax-free bond issue in February this year to raise Rs 500 crore.

“The green bonds market is a nascent one and Rs 1,500 crore will be a small part of the overall work that the IREDA is doing. However, this will help provide low-cost funds for a longer term to domestic investors,” said Jasmeet Khurana, senior manager (consulting) at market intelligence firm Bridge to India.

As the Narendra Modi-led government aims to install 100 gigawatt of solar power over the next five years and an equal amount from wind, the requirement for funding has gone up tremendously in this finance-starved sector.
For example 8-10 gigawatt of wind installations a year, as per targets, will require an estimated up to USD 10 billion each year.

IREDA’s Popli thinks that when the solar capacity increases to 8,000 megawatt a year, there will be the need for earmarking funds by big banks and other institutions for the sector. “I think the fund requirement is huge and there will be space for everyone in the market,” he said.

Almost 60% of IREDA’s funding comes from multilateral lines of credit and most of them are willing to consider next lines of credit once the existing ones get exhausted. Popli expects funding to come from Japan International Cooperation Agency, European Investment Bank, African Development Bank, Asian Development Bank and the likes in future.

IREDA’s networth is around Rs 2200 crore and the non banking financial company is planning to more than double it over the next two years, possibly with an initial public offering as well. By the end of this financial year, IREDA aims to lend about Rs 3,000 crore, which is 20% higher compared with last fiscal.

Currently India has 22 gigawatt of wind energy installations and 2.8 gigawatt of solar power.

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