IREDA Aims to Recover ₹365 Crore from Gensol, Plans to Raise ₹3,000 Crore by Year-End.

IREDA, a lender to green businesses, is hopeful of recovering its exposure to scam-hit Gensol Engineering and BlueSmart. The firm has an outstanding exposure of ₹365 crore and has already recovered ₹275 crore. IREDA plans to raise ₹3,000 crore by year-end and is considering a bond issue to raise an additional ₹4,000-5,000 crore. The Central Board of Direct Taxes has notified IREDA bonds as 'long-term specified assets', enabling investors to claim capital gains tax exemption.

Indian Renewable Energy Development Agency (IREDA) is making significant strides in recovering its exposure to Gensol Engineering and BlueSmart. Despite the setbacks caused by the alleged scam, IREDA remains optimistic about its ability to recoup its losses and strengthen its financial position.

IREDA currently has an outstanding exposure of ₹365 crore to Gensol Engineering and BlueSmart, but it has already recovered ₹275 crore through various means, including encashing bank guarantees and fixed deposits provided by Gensol. The interim resolution professional appointed by IREDA has initiated proceedings to recover the remaining amount, with the first meeting of the committee of creditors expected this week [1].

Pradip Kumar Das, Chairman and Managing Director of IREDA, expressed confidence in the company's ability to turn around its position once the fleet of electric vehicles (EVs) is back in service. He emphasized that the business model for which IREDA lent funds is highly lucrative, with loan terms aligning with the vehicle's life expectancy. Das also highlighted the need to tighten review and monitoring systems to prevent similar incidents in the future [1].

In addition to recovering its exposure, IREDA is planning to raise ₹3,000 crore by year-end. The company is also considering a bond issue to raise an additional ₹4,000-5,000 crore. The Central Board of Direct Taxes has notified IREDA bonds as 'long-term specified assets' under Section 54EC of the Income-Tax Act, enabling investors to claim capital gains tax exemption [1].

The recent SEBI investigation revealed that Gensol had allegedly diverted funds from EV procurement loans to BluSmart and for personal expenses, including luxury items and real estate. The investigation also found evidence of Gensol misleading investors by inflating EV procurement figures and concealing manufacturing activities at its EV plant [1].

IREDA's portfolio is primarily tilted towards traditional projects, with 76% exposure, and emerging technologies account for about 22%. This strategy has helped IREDA maintain a net interest margin of 3.7% despite rising competition. The company's asset quality is robust, with a cumulative write-off of just ₹135 crore over the last 38 years [1].

In another development, SL Green Realty Corp. has raised over $1.0 billion for its SLG Opportunistic Debt Fund, highlighting the shift in capital allocation strategies in the post-pandemic real estate market. The fund's success is rooted in the dislocation between improving leasing fundamentals and the stagnant recovery of debt capital markets. SL Green's strategy involves originating new loans, acquiring existing debt, and targeting CMBS securities, capitalizing on the gap created by traditional lenders' retreat [2].

Investment Takeaway: While IREDA's recovery efforts and fundraising plans are encouraging, the challenges posed by the Gensol episode underscore the importance of robust review and monitoring systems. For investors, IREDA's bond issue offers a tax-exempt investment opportunity, while the SLG Opportunistic Debt Fund presents a high-conviction play in the post-pandemic real estate recovery.

References:
[1] https://www.thehindubusinessline.com/companies/ireda-chief-confident-of-recovery-from-gensol-fiasco/article69838865.ece
[2] https://www.ainvest.com/news/sl-green-opportunistic-debt-fund-strategic-bet-capital-dislocation-post-pandemic-real-estate-recovery-2507/