In News:

• The Indian Renewable Energy Development Agency Ltd (IREDA) has successfully raised ?453 crore through its second issue of Perpetual Bonds at an annual coupon of 7.70%.
• The issue received bids worth ?1,343 crore against the base size of ?100 crore and a Green Shoe option of ?400 crore, resulting in an oversubscription of 2.69 times.
• This fund infusion will help IREDA strengthen its capital base and enhance its ability to finance green and renewable energy projects, in line with India’s clean energy transition goals.

What are Perpetual Bonds?

• Definition: A type of fixed-income security with no maturity date, paying interest indefinitely. They are also called “perps” or “consol bonds.”
• Redemption: Issuers are not obligated to repay the principal, though most bonds have a call option after 5–10 years, allowing issuers to redeem them if market conditions are favorable.
• Returns & Risk:
  • Offer higher interest rates to compensate for indefinite tenure.
  • Highly sensitive to interest rate fluctuations.
  • In case of bankruptcy, bondholders are paid after secured creditors but before shareholders.
• Accounting Perspective: Often treated as equity-like instruments on balance sheets, making them attractive for strengthening capital structure without diluting ownership.
• Usage in India: Commonly issued by banks and financial institutions to meet capital requirements.

Significance of IREDA’s Move

• Capital Strengthening: Provides a stable, long-term source of funds without creating repayment obligations.
• Boost to Renewable Energy: Ensures greater financing availability for solar, wind, bioenergy, and emerging green technologies.
• Market Confidence: Oversubscription reflects investor trust in India’s renewable energy sector and in IREDA’s financial stability.
• Policy Alignment: Supports India’s commitment to achieve 500 GW of renewable capacity by 2030 and transition towards net-zero by 2070.