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Indian Energy Exchange Ltd

| Q2 FY26 Investor Conference Call

NEUTRAL SENTIMENT

Report Source

⬤31st Oct 25

Summary : IEX delivered strong Q2 FY'26 volume and profit growth, driven by RTM and green markets, but faces regulatory challenges from market coupling and the need for strategic diversification.

Management Perspective positive : "We expect reasonably good growth. We should be able to maintain a growth of 15% to 20%.""I am sure growth potential what we have achieved in the past, we should be able to sustain in the future also.""We are definitely going to take technology intervention to ensure our customers share.""I do not see any such situation that after coupling, there will be a price war in the DAM market. Why should we talk about war? Let us talk about peace."

Concall Report Analysis & Insights

Business Overview

  1. IEX recorded electricity trading volume of 35.2 billion units in Q2 FY'26, a 16.1% YoY growth.
  2. Revenue grew 9.2% YoY to Rs. 183.3 crores, while profit after tax increased 13.9% to Rs. 123.4 crores.
  3. Real-Time Market (RTM) volumes grew 39% YoY, now representing 36% of total IEX volume.
  4. Green market volume increased 17.7% YoY to 3 billion units, integrating clean energy sources.
  5. IGX traded gas volume grew 37% YoY to 16.1 million MMBtu, with PAT of Rs. 9.6 crores.

Future Growth Prospects

  1. India's strong GDP growth (7.8% in Q1 FY'26) and revised FY'26 forecast (6.8%) will drive demand.
  2. Proposed Electricity Act amendments aim to streamline tariffs and eliminate cross-subsidies, boosting C&I segment.
  3. Draft regulations for carbon credit trading through power exchanges are expected soon, creating new market.
  4. MoP monitors 80 GW thermal capacity addition by 2032, and BESS projects are being awarded, supporting grid stability.
  5. New market mechanisms like battery storage arbitrage and virtual PPAs are transforming the power sector.

Management Insights

  1. Management expects 15-20% volume growth for the remaining FY'26, driven by India's economic expansion.
  2. RTM volumes are higher due to increased power availability, lower prices, and DISCOMs leveraging flexibility.
  3. IEX is actively working on technology interventions to retain customer share and loyalty post-market coupling.
  4. The company is interested in coal and carbon exchanges, undertaking preparatory work for future licenses.
  5. Management believes IEX's USP lies in its 17 years of market building, customer understanding, and market development activities.

Signs of Skepticism

  1. Management stated they are 'not aware about any developments' regarding market coupling implementation details.
  2. Management avoided a direct answer on potential price wars if market coupling leads to increased competition.
  3. The timeline for IGX equity stake reduction is tight, with an extension requested but not yet confirmed.
  4. Uncertainty remains on the financial impact and volume potential of carbon credit trading.

Risk Factors

  1. Market coupling for Day Ahead Market is mandated by January 2026, with IEX appealing the order.
  2. Potential for revenue decrease post-market coupling due to increased competition.
  3. Requirement to reduce IGX equity stake to 25% by December 2025, with an extension requested.
  4. Uncertainty regarding the timeline and operational details of market coupling implementation.
  5. Lower REC certificate volumes and reduced transaction fees impacted overall revenue growth.

Good To Know

  1. India's Q1 FY'26 GDP growth was 7.8%, with 8% higher monsoon rainfall, highest in five years.
  2. Imported coal prices declined 19% YoY to $42/ton, and imported gas prices were favorable at $12/MMBtu.
  3. CERC issued draft guidelines for virtual power purchase agreements (VPPAs), recognizing exchanges as platforms.
  4. CERC ordered market coupling for the Day Ahead Market by January 2026, with RTM coupling to be considered later.
  5. Ministry of Environment notified Greenhouse Emission Intensity targets for 271 obligated entities for carbon market.

Key Drivers

  1. India's robust economic growth.
  2. Increasing national electricity demand.
  3. New market mechanisms adoption.
  4. Carbon credit trading launch.

Key Analyst Discussions

Competitive Environment

  1. Q: What is IEX's role in the coal and carbon exchanges? A: IEX is interested, doing preparatory work, and will apply for licenses once regulations are finalized.
  2. Q: Will IEX engage in price wars if market coupling occurs? A: Management will assess market conditions; price wars are not expected, citing Term Ahead Market experience.
  3. Q: What is IEX's unique selling proposition (USP) for customer retention? A: 17 years of market building, strong customer connectivity, understanding customer needs, and market development activities.

Market Trends & Consumer Behavior

  1. Q: Is muted power demand growth attributable to weather or C&I slowdown? A: Primarily due to good monsoon rains reducing agricultural and domestic summer demand; C&I demand is increasing.
  2. Q: Why aren't customers utilizing cheaper solar power during daytime? A: Demand is shifting to daytime, and battery energy storage solutions are emerging to store surplus power for peak hours.

Financial Highlights

  1. Q: Why did revenue growth (10.42%) lag electricity volume growth (16.1%) in Q2 FY'26? A: Due to lower REC certificate volumes and reduced transaction fees (Rs. 40 to Rs. 20).
  2. Q: What is the settlement obligation payable as of H1 FY'26? A: The total payable amount was approximately Rs. 500 crores.

Product Composition

  1. Q: Is RTM volumes surpassing DAM a sustainable trend? A: Yes, RTM prices are 10-12% lower, benefiting DISCOMs and driving higher RTM volumes.
  2. Q: Why have Term Ahead Market (TAM) volumes remained stagnant? A: Good rains reduced power shortages, decreasing the need for bilateral TAM transactions.
  3. Q: What is the potential share of Virtual PPAs on exchanges? A: Approximately 2,000 MW of VPPAs are under operation, with the entire power component coming to the market, mostly IEX DAM.

Strategic Considerations

  1. Q: What is the status of market coupling implementation? A: IEX is unaware of operational details or requests for software development; the next APTEL hearing is November 28.
  2. Q: What is the timeline for reducing IEX's IGX equity stake to 26%? A: The deadline is December 2025, but an extension has been requested from PNGRB due to market ramp-up challenges.
  3. Q: What technology changes will IEX implement to retain volume if market coupling occurs? A: IEX is working on technology support and customer loyalty initiatives, but specific details were not disclosed.
Indian Energy Exchange Ltd (IEX) Concall Report Analysis & Insights | Dhanarthi