IEX stock jumps on likely delay of market coupling; focus now on volume and pricing

Mint

11-07-2025

Indian Energy Exchange (IEX) Ltd stock was in focus this week after it shot up on Wednesday in response to a media report indicating the government had no timeline for its decision on the market coupling of electricity exchanges. The proposal, mooted about two years ago, would reduce the near-monopoly IEX enjoys in electricity trade with an 84% market share.
Market coupling refers to the integration of all sale and purchase bids across the three power exchanges, much like combining bids from BSE and NSE, for uniform price discovery through a centralised authority. A report by grid controller of India on the matter is being reviewed by the Central Electricity Regulatory Commission (CERC).
While the move may deliver marginal benefits because of inefficiencies in the electricity market, it would diminish the role of individual exchanges and impact longer-term market development. It may have greater impact on IEX than others because of its near monopoly in day ahead and real time market (DAM and RTM) with an almost 99% share, as per CERC data. The term ahead market, where it has a share of about 44%, has more balanced structure. 'We believe that the risk-reward is not in favour of nation-wide implementation of MC in the near future," said a report by JM Financial Institutional Securities Ltd.
Summer blues
IEX had a subdued June, with trading volume of 10.8 billion units (BU) marking modest growth of 6.5%, as the early monsoon hurt demand. Yet, growth of 20% in the first two months helped June quarter (Q1FY26) volume grow 15%. With greater participation from producers and increasing availability of power, market clearing price (MCP) in RTM fell 20% to ₹3.91 per unit during the quarter.
'The price dip, driven by surplus renewable supply, highlights the need for enhanced storage and grid infrastructure to manage supply-demand mismatches, particularly during evening peak hours," said Incred Research Services Private Ltd.
For FY25, average MCP was 15% lower year-on-year at ₹4.47 per unit. The improving pricing efficiency in the market is prompting distribution companies and industrial consumers to procure more through exchanges, which helps IEX.
'We expect the trading volume to grow at a CAGR of 13% during FY25-28, which will drive growth in IEX's revenue and PAT at a CAGR of 16% and 14% respectively," said the JM Financial report. For FY25, the company recorded Ebitda growth of 20% with an Ebitda margin of 85%.
Silver lining is green
The exchange is seeing high momentum in its newer market segments, green market and renewable energy certificates (RECs). The two accounted for 19% of total traded volumes in FY25, up from 11% in FY24. Volumes in the green market, involving the sale and purchase of renewable energy, grew 51% in Q1FY26, becoming more attractive for consumers with declining prices.
RECs are tradable certificates issued by a government entity to a renewable power generator, with 1,000 units of renewable power generation fetching one REC. Discoms buy these to meet their green power obligations. For Q1FY26, RECs recorded 149% volume growth.
IEX is also expected to benefit from the launch of electricity derivatives, which should help increase volumes further. The stock is up about 13% so fat this year and trades at 37 times estimated FY26 earnings, as per Bloomberg. For now, the valuation seems to have captured the company's stable outlook adequately.