PM Suryoday Yojna: REC Ltd & IREDA India's Solar Revolution

Solar Revolution in India

On January 22nd, Our Indian Prime Minister Narendra Modi launched a visionary scheme in Ayodhya that will transform the way we extract energy.  The "Pradhan Mantri Suryodav Yojna" mainly wants to place solar panels in more than a crore homes, which will help India to enter a new era of clean, sustainable force and become a powerful nation.

For those who missed the announcement, we've recently covered this in a recent blog where we discussed all the details and covered some potential game-changing stocks related to this scheme. If you haven't read it, you should as it will help you to understand this blog in a much more efficient manner. Therefore It becomes a must-read to understand today's scheme.

So, what is this scheme all about? We will explain in simple terms.

Detailed Video

Funding the Solar Dream

Implementing such an extraordinary project requires a significant amount of funding, and REC Ltd is stepping up to serve the purpose. The director of REC Ltd took the initiative and decided to fulfil the financial requirements required for this project– which sums up to about two lakh crore rupees for installing 40 GW of rooftop solar panels.

This is similar to what we have seen in the railway sector, where companies like IRFC funded projects, here, two public sector companies are in the limelight. They've already provided funding for two crucial schemes under the power ministry.

Key Players

REC Ltd:

This powerhouse is a Public Sector Undertaking (PSU) working under the Ministry of Power. They're no strangers to big numbers, having sanctioned loans of 2,68,470 crores in the last fiscal year. Now, they're all set to sanction a huge amount of 4,00,000 crores in loans, with 1.2 lakh crores dedicated to specifically the solar initiative taken by our beloved Prime Minister.

What makes REC Ltd stand out? It's the first PSU to tap into international markets for funding, raising green bonds on the London Stock Exchange in 2017. And here's the important note– it's undervalued, with a PE ratio at half the industry average.

IREDA:

The Second Company that steps out to serve this purpose is IREDA which stands for Indian Renewable Energy Development Agency Limited. This company, incorporated in 1987, falls under the Mini Ratna Category 1 by the Indian Government. They specialise in financing renewable energy and energy efficiency projects. In the last fiscal year, they sanctioned loans amounting to a staggering 32,600 crores. However, the PE ratio seems to be on the higher side compared to the industry average.

Since the COVID era, IREDA has been on a financing spree, witnessing continuous growth in profits and margins.

Future Plans

REC Ltd has been entrusted with a mammoth task – funding solar panels for 1 crore homes and allocating 1.2 lakh crores for solar panel installations. The Ministry of New and Renewable Energy has divided states and union territories into 8 Central Public Sector Enterprises (CPSEs), each receiving a 15,000 crore rupees loan from REC. Their target? Install 40 GW of rooftop solar by 2026.

The majority of these solar systems will fall into the 3KW category, and discussions are ongoing to increase government subsidies, potentially paving the way for unprecedented growth.

This blog examines deeply into the companies that provide funding to solar energy projects. Click Here for a separate blog in which we have covered the major elements related to solar energy sector.

Conclusion

As India steps into the solar era, REC Ltd and IREDA are playing important roles in making it a reality. While REC Ltd is undervalued and strategically positioned, IREDA, with its continuous growth post-COVID, brings its own strengths to the table.

The solar revolution is not just about harnessing energy from the sun; it's about powering a sustainable and greener future for India. As the sun sets on traditional power sources, these companies are rising to the occasion, lighting up a brighter and cleaner tomorrow.

So, keep an eye on the solar situation of our country - as the future's looking brighter than ever!