IREDA gets 'Navratna' status: What it means for the PSU, how it's achieved
Upstox
2 min read • Updated: April 27, 2024, 11:57 AM
Summary
The Navratna tag allows IREDA to invest up to ₹1,000 crore a year without prior approval from the Centre. The categorisation also frees the PSU to enter into joint ventures, alliances and to set up subsidiaries abroad.
The Indian Renewable Energy Development Agency Limited (IREDA), an entity wholly-owned by the central government, has been accorded the 'Navratna' status by the Finance Ministry's Department of Public Enterprises, a regulatory filing stated on April 26.
The categorisation was awarded to the public sector undertaking (PSU) days after it reported a robust performance in the quarter ending March 31, 2024.
IREDA, which serves as a non-banking financial company (NBFC) involved in financing projects related to renewable energy, logged a 32% year-on-year surge in net profit at ₹337 crore in Q4FY24. The assets under management (AUM) grew to ₹59,698 crore, up 37% from the year-ago quarter.
Also Read: IREDA shares rally on record profit, strong loan growth in FY24
What the 'Navratna' status means for IREDA
With the Navratna status accorded to IREDA, the PSU is now free to make investments up to ₹1,000 crore in a fiscal year without prior approval from the central government. This autonomy is only extended to top-tier state-owned companies.
A PSU with the Navratna tag is allowed to invest up to 30% of its net worth within a financial year, provided that it does not cross the ceiling of ₹1,000 crore. Furthermore, the Navratna firms are also allowed to enter into joint ventures, forms pacts and set up subsidiaries offshore.
How is the Navratna status achieved?
According to a government release, the Navratna tag is achieved by only those central public sector undertakings which have obtained "excellent" or "very good" rating under the Memorandum of Understanding system in three of the last five years.
They should also have a composite score of 60 or above in the six selected performance parameters, namely, net profit to net worth; manpower cost to total cost of production/services; profit before depreciation, interest and taxes to capital employed; profit before interest and taxes to turnover; earning per share; and inter-sectoral performance.
How have IREDA shares performed?
On April 26, the shares of IREDA traded in the green and settled at ₹170.65 apiece on the National Stock Exchange (NSE). This was 2% higher as against the previous day's close. Year-to-date, the stock has rallied by 63.3%. The PSU was listed on the exchanges in November 29, 2023, following an initial public offering.