Indian Energy Exchange (IEX) – A Potential Future Winner

Post Paris Accord, World is moving towards clean energy. Fossil Fuel Industry is being threatened due to enhanced carbon footprints on the planet. Election in Europe is being Faught with climate risk as the central agenda and demand of citizens.  This rapid shift is evident in the market.  According to research of International Renewable Energy Agency, more than 260 GW of addition was made in renewable energy capacity in 2020, which was up by 50% in comparison to previous year.

Globally World is shifting towards energy market place. Many peer-to-peer, block chain based platforms for energy trading are operating across various countries. This is indicating the permanent shift, in the way Energy market will be evolving in future and energy will be traded on the platforms.

India is seeing acceleration in solar and wind energy capacity at the centralised as well as decentralised level. Regulatory policies are incentivising the renewable adoption.  Fast pace adoption is evident from the fact that from 4% share in electricity generation in year 2008- 09, it has scaled up to 11% in 2020-21. Presently, the installed renewable capacity of 94 GW represents 24.7% of the total capacity, estimated at 382 GW. Further Fame II policy is enabling the faster adoption of electric mobility. As per estimates of International Energy Agency India Energy, in future the market for solar Panel, wind turbines, electric battery equipment will expand to over $40 billion per year by 2040. In future, there will be a bigger footprint of, new breed of consumers called ‘prosumers’ who will produce energy as well as consume and trade energy.

Indian Energy Exchange (IEX) is market leader in power exchange business in India, and enjoys market share over 90%. Indian Energy Exchange provides marketplace through its automated trading platform for energy products.  IEX has around 7000 participants and presence in almost all the States and  Union Territories in India

It offers wide variety of energy solutions. It offers various choices to trade in Green Market, Electricty Market and Certificate Market. Under Electricity Market, it has various products like Day Ahead Market, Term Ahead Market, Real Time Market, Cross Border Electricity Trade etc. Day ahead market provides trading of contract involving time duration of 15 minutes. Term Ahead Market provide solutions related to delivery of electricity for a few days in advance  Real Time Market provides solutions related to new auction session every half an hour, for trading of 15-minute contracts, where power will be delivered after 4 time blocks or an hour after closure of the auction. IEX can also be credited for expanding Indian Power Market overseas and building an Integrated Power Market in South Asia. South Asian Countries e.g. Nepal, Bhutan and Bangladesh, which are connected through grid can transact energy using IEX platform. In future the marketplace can expend if more countries are joined through grid.

In month of September, the Indian Energy Exchange achieved 59% YoY growth, by trading 8,997 MU electricity volume. This was in line with the increase in National demand, according to the data on power demand, published by National Load Dispatch Centre. In September, the national peak demand in saw 2% YoY growth, with the highest ever peak demand at 180.7 GW.

IEX traded 6,418 MU volume, at average monthly price of Rs 4.4/unit, in September in Day Ahead, market  . In Term Ahead market, IEX traded 193 MU. For the combined second quarter, it witnessed a growth of 438% on YoY basis, at cumulative volume of 1571 MU. Real Time electricity market witnessed a cumulative growth of 125% on YoY basis at cumulative volume of 5298 MU.

During the FY 2021, Company achieved record breaking trading volume of 74 BU. Electricity segment grew by 37.3% (YoY Growth) Revenue Growth of Rs 357.4 Crore (20.3% YoY Growth) and Pat of Rs 213.5 Crore (20% YoY Growth). Company has outstanding share of 2995.56 Laks of Rs 1 each. All the shareholders are classified as public shareholders. Mutual Funds (Nippon Life, UTI, Mirae Asset, Parag Parikh) have exposure in IEX under different scheme. Major FPI’s and Financial Institutions and Banks have investment in it. Company has sound corporate Governance and strong leadership in place for driving the growth. Under the leadership of Mr Satyanarayan Goel  (Chairman and MD), Company is touching new heights.

Further Company has diversified by launching India’s first Gas Exchange. Its strategic investors include NSE, ONGC, GAIL, Torrent Gas and Adani. Government has a vision to increase the share of Gas in the total energy mix from 6% to 15% by the year 2030 and IEX is uniquely placed to benefit from it.

The Draft Electricity (Amendment) Bill 2021 seeks to reduce entry barriers for private players in the power distribution sector. Government is set to decentralise and promote peer-to-peer (P2P) energy trading. The India Smart Grid Forum (ISGF) in partnership with Australian company Power Ledger ( expert in energy based block chain solutions) has launched a peer-to-peer trading pilot program in the states of Uttar Pradesh and Delhi.

Given the strong regulatory push of the Government to transform the market from fossil fuel to renewable and commitment of countries to Paris Agreement, energy market is set for a major transformation. India has huge demand for the electricity from domestic as well as industrial perspective. The demand is set to grow in future as we move towards higher trajectory of growth. Given the strong presence of IEX in the energy market and monopoly nature of business, it can be a big wealth creating opportunity in future.

Bureau Galactik Views

(As on 5th October, IEX has closing price of Rs 632.35 and Market Cap of Rs 18,942.46 Crores)

(This article is not an investment advice)

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