Founded in 1987 by the government, the Indian Renewable Energy Development Agency (IREDA) is a non-banking finance company for renewable energy. Though it is far from being on par with its counterparts, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) in size, chairman & managing director Debashish Majumdar believes that’s not IREDA’s objective. He talks to DNA, among other things, on the road ahead for IREDA and the way it measures its own success. Excerpts:
What necessitated the founding of IREDA?
IREDA was founded at a time when no bank wanted to finance renewable energy projects. That was one of the major barriers. We had to change that by creating success stories out of these projects.
For that, we needed to be a specialised institution. To finance new technologies, you have to understand the technology first, which helps you truly assess the risks. IREDA is mainly manned by engineers. I am one myself. Even 15 years ago one bank would touch a wind energy project, but we have mainstreamed wind and mini-hydro projects. We fund newer, risky technologies.
Do you fund big hydel projects?
We have recently started financing them.
What is the size of your loan book and how is it divided between different sectors?
It’s about Rs3,300 crore. About 50% of that is wind and the rest is bio-mass and mini-hydro projects.
What about disbursals?
It was about Rs800 crore last fiscal, this year it should rise to Rs1,300 crore. Next fiscal, it should be much more because of the upcoming solar projects.
Are you an infrastructure NBFC yet?
Not yet, but we have applied for it and should get the status soon.
Do you pick up equity stakes in projects?
We are not yet mandated to do that, but we are looking at it. At the moment, we just provide loans.
How long do you think before you attain the current size of your peers such as PFC and REC?
They are ten times as big as us. Our USP is not our size, but the fact that we finance projects that no one else wants to. Everything we do is risky, but we still make profits. Our gross NPAs (non-performing assets) were disturbing at one point, but now they are at 7%, however, our net NPAs are 0%.
Our success is measured by whether our share goes down in a growing market. We are invariably the first to finance a sector. For instance, banks finance wind energy projects on the basis of the balance sheet of the company rather than on the strength of the project. Similarly, if a bio-mass project is captive, a bank will fund it, not if it’s an independent project. We want the market to become an IPP (independent power producer) one. That’s our role.
Your mandate is not restricted to generation projects, right?
Yes, we did at one point some manufacturing projects, but now we finance energy efficiency initiatives. As everyone knows, there is a huge demand-supply gap in India. If the demand can come down due to energy efficiency, we could save some 25,000 mw at a fraction of the cost it will take to generate that. The one where have been most successful in this space is sponge iron facilities. Their kilns produce tremendous heat. That waste heat is used to produce electricity. This helps companies save energy and control pollution.
Do you have any diversification plans?
Yes, we have just mooted the idea to grow our business by increasing the ambit of the projects we finance. We are looking to become an organisation that funds clean technologies, not just in power. But this is going to take time as it means rewriting our mission.
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