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IREDA share rose after getting ‘Navratna’ status, stock up 3x from listing price

IREDA-share-rose-after-getting-‘Navratna’-status,-stock-up-3x-from-listing-price

IREDA, incorporated as an NBFC, is engaged in promoting, developing, and extending financial assistance for setting up projects relating to new and renewable sources of energy. The company was listed on bourses in November last year, and since then, the stock has been an outlier, giving more than 3x returns from the listing price in less than a year.

Before last Friday, IREDA was carrying the status of a 'miniratna' public limited government company, administratively controlled by the Ministry of New and Renewable Energy (MNRE). But in a filing with the exchange, the company, IREDA, stated that it has been granted 'Navratna' status by the Department of Public Enterprises. Before last Friday, there were 57 Miniratna, 16 Navratna, and 13 Maharatna companies.

S. No. List of Navratna Companies
1 Engineers India Ltd (EIL)
2 Container Corporation of India Ltd (CONCOR)
3 Bharat Electronics Ltd (BEL)
4 Hindustan Aeronautics Ltd (HAL)
5 Neyveli Lignite Corporation Ltd (NLC India)
6 Rashtriya Ispat Nigam Ltd (RINL)
7 Rashtriya Chemicals & Fertilisers Ltd (RCF)
8 Mahanagar Telephone Nigam Ltd (MTNL)
9 National Buildings Construction Corporation Ltd (NBCC)
10 National Aluminium Company Ltd (NALCO)
11 National Mineral Development Corporation Ltd (NMDC)
12 Rail Vikas Nigam Ltd (RVNL)
13 Shipping Corporation of India Ltd (SCI)
14 ONGC Videsh Ltd (OVL)
15 RITES Ltd
16 IRCON International Ltd
17 IREDA Ltd

 

Navratna companies are a group of highly prestigious public-sector enterprises in India. These companies are known for their exceptional performance and contribution to the Indian economy. They possess significant financial autonomy and have the authority to make investment decisions without seeking government approval for projects up to a certain limit.

The Government of India categorizes Central Public Sector Enterprises (CPSEs) under three different categories, based on different criteria: Maharatna, Navratna, and Miniratna. A wide range of factors determine the categorization, including annual turnover, net worth, and net profit calculated on an annual basis.

What are the benefits for the Navratna Company of India?

  • CPSE are defined in various categories, and they enjoy certain benefits on various fronts. Once a company fulfills the eligibility criteria for becoming a Navratna, it can get some investment benefits. The benefits that such companies get are as follows:
  • Greater financial and operational autonomy.
  • Navratna companies are permitted to invest up to 15%, or Rs. 1,000 crore, of their total net worth on a single project without government approval.
  • Navratna companies have the freedom to make investments up to 30% of their net worth within a year, as long as they do not exceed Rs. 1000 crore.
  • Navratna companies possess the flexibility to enter into joint ventures, establish alliances, and establish subsidiaries abroad.

Eligibility Criteria for Navratna Companies

Here comes the eligibility criteria under which CPSE is granted Navratna status. As per a circular by the Ministry of Heavy Industries, a public sector enterprise must fulfill certain eligibility criteria.

  • The company should already have Miniratna Category I status and be listed under the Schedule A listing of Central Public Sector Enterprises.
  • The Miniratna category company should have obtained an ‘excellent’ or'very good’ rating under the Memorandum of Understanding system in three of the last five years and have a composite score of 60 or above in the six selected performance parameters, namely,
  • Net profit to net worth
  • Manpower costs in relation to the total cost of production or services.
  • Profit before depreciation, interest, and taxes on capital employed,
  • Profit before interest and taxes on turnover,
  • Earnings per share and
  • Inter-sectoral performance
  • Lastly, the company is required to have at least four independent directors on its board of directors.

The stock made gap up opening and is trading 7% up at Rs. 184 (75%+ YTD).

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