IREDA 632% vertical takeoff to 42% glide in just 50 sessions, stock PSU gives real control. Buy, hold or exit?

Power NBFC Indian Renewable Energy Development Agency (IREDA) has stunned the market with a blistering 632% surge in just over 13 months — a surge that has sparked astonishment and caution amid repeated warnings of an impending cooldown. This correction came in January, shortly after the stock touched its all-time high of Rs 234 on the NSE, and has since fallen 38% from its peak.

A notable aspect of this decline is the speed with which the stock tumbled from its peak to a 52-week low of Rs 137 on March 17, 2025. IREDA lost 42% in just 50 trading sessions.

Since then, the stock has remained on the sidelines, consolidating within a certain range.

But investors who participated in its initial public offering (IPO) or in the early days of its listing would still be sitting pretty. At Rs 144.50 as of Wednesday’s close, IREDA shares are trading 352% above the IPO price of Rs 32 per share. But the question remains, should they book profits or stay invested?

Drumil Vithlani, technical research analyst at Bonanza, said the stock has been trading in a strong downtrend, consistently making lower lows and lower highs, indicating continued bearish momentum. It remains below all major EMAs (20, 50, 100 and 200), confirming weakness on all time frames.

IREDA is now within a short distance of its major support level of Rs 140, Vithlani said, warning investors against further downside if the stock falls below that level. Any sign of recovery should be expected above Rs 158, this analyst said, highlighting technical muted buying power and continued chart pressure as suggested by RSI 39.54. In bold he suggests “DO NOT” make any new entry at this stage and “strictly” treat 140 as a stop loss.

Circuit shorts

The correction came despite IREDA’s strong quarterly numbers. In Q2FY26, the company reported standalone net profit growth of 42% to Rs 549 crore, while its total revenue saw a jump of 26% to Rs 2,058 crore. With the exception of the June quarter of FY26, the company has seen year-over-year and sequential growth in net profit since its IPO. Meanwhile, the top line has grown year-over-year and quarter-over-quarter in each of the past eight quarters.

Nitin Jain, Principal Research Analyst (Fundamental) at Bonanza, said the initial frenzy at the listing stage, which led to very rich price-to-book (P/B) and price-to-earnings (P/E) multiples, is now becoming expensive. This trend is now normalizing as the market reevaluates sustainable growth, spreads and PSU-specific risks, Jain said, while highlighting the impact of the company’s exposure to the Gensol group, a reflection of the company’s deteriorating asset quality.

Santosh Meena, head of research at Swastika Investmart, called the valuation cut in a similar vein. “The stock is cooling from an unsustainable 5X-6X Price-to-Book (P/B) premium to a more realistic 3.9X. Despite Q2FY26 net profit growing 41% YoY, the market is repricing closer to REC/PFC parity (1.5X-2.5X),” Meena pointed out.

P/B tracker — Source: Screener.

The company is also reeling under pressure on margins. Rising fund costs are squeezing net interest margins (NIMs) and with interest costs up 17% year-on-year and interest rates unchanged, investors fear that spread compression will dampen future profitability, Meena warned.

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Declining energy sector

IREDA’s concerns are compounded by the difficulties in the energy sector. PSU REC, SJVN, Power Finance Corporation (PFC) stocks underperformed on a year-to-date basis, falling 31% to 25% in the period compared to a 25% decline in IREDA.

Meanwhile, shares of Power Grid Corporation, NTPC and Coal India have fallen as much as 19% in the 12 months.

Jain of Bonanza attributes the power sector’s underperformance to a combination of factors — profit-taking after years of growth, concerns about tariff caps and regulatory tightening, short-term margin pressures from fuel and interest costs and a shift in investor flows to other themes, despite strong underlying electricity demand.

Satyadeep Jain, principal analyst at Ambit Capital, said there was a slowdown in power demand, which fell 6% year-on-year in October and the trends continued in November. He added that delays in commissioning the transmission were also a factor. “This year has seen increased renewable energy (RE) curtailment and all this has led to a slowdown in renewable energy tenders and letters of award (LoA) as well as PPA conversion of existing LoAs. The slowdown in tendering, awarding and PPAs has resulted in a slowdown in RE funding requirements,” Jain said.

With Discom losses exceeding Rs 6.9 lakh crore, the market is worried about cash flow issues and is waiting for concrete implementation of the Electricity Act, Meena said.

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What should investors do?

Bonanza’s Jain stopped short of a buy, sell or hold recommendation, though he remained bullish on IREDA’s strong growth and momentum along with a comfortable capital position. In his view, elevated structural risks and increasingly rich multiples relative to PSU peers are driving up the risk-reward balance.

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Meena has recommended a “Hold” view, saying the stock is deeply oversold near its key support zone of Rs 137-140. “Sales now risk bottoming out. The long-term renewable funding story is intact and Q2 earnings growth confirms the business is scaling despite sector headwinds,” he said.

(Disclaimer: Recommendations, suggestions, views and opinions of experts are their own. They do not represent the views of The Economic Times.)