DuPont Decomposition
Why does IREDA earn its ROE?
Breaking down Return on Equity into profitability, efficiency, and leverage.
ROE = Net Margin × Asset Turnover × Equity Multiplier
16.5% = 25.7% × 0.08 × 7.77
Latest: FY2025
Profitability
Net Margin
25.7%
22.8% →25.7%
How much profit per ₹ of revenue
Efficiency
Asset Turnover
0.08x
0.08x →0.08x
Revenue per ₹ of assets
Leverage
Equity Multiplier
7.77x
6.97x →7.77x
Assets funded by equity vs debt
Trend Analysis
ROE improved by 4.5 pp over 4 years. Driven by net margin improving (22.8% → 25.7%), leverage rising (6.97x → 7.77x). High financial leverage (equity multiplier > 4x) amplifies returns but also risk.
Historical Decomposition
Last 4 years
| Year | Revenue | PAT | Net Margin | Asset TO | Leverage | ROE |
|---|---|---|---|---|---|---|
| FY2022 | ₹0Cr | ₹0Cr | 22.8% | 0.08 | 6.97 | 12.0% |
| FY2023 | ₹0Cr | ₹0Cr | 25.9% | 0.07 | 8.50 | 14.6% |
| FY2024 | ₹0Cr | ₹0Cr | 24.3% | 0.02 | 7.31 | 3.9% |
| FY2025 | ₹0Cr | ₹0Cr | 25.7% | 0.08 | 7.77 | 16.5% |
How to read DuPont
- • Rising ROE from margin = pricing power, operational improvement (good)
- • Rising ROE from turnover = better asset utilization (good)
- • Rising ROE from leverage = more debt, amplified risk (caution)
- • Falling ROE across all three = structural deterioration (red flag)
DuPont decomposition from audited annual financials. Factual analysis, not investment advice.