About the Company

IEX is the first and largest energy exchange in India providing a nationwide, automated trading platform for physical delivery of electricity, Renewable Energy Certificates, and Energy Saving Certificates. The exchange platform enables efficient price discovery and increases the accessibility and transparency of the power market in India while also enhancing the speed and efficiency of trade execution. In August 2016, the Exchange received ISO Certifications for quality management, Information security management, and environment management. The Exchange is now a publicly listed company with NSE and BSE. IEX is approved and regulated by the Central Electricity Regulatory Commission (CERC) and has been operating since 27 June 2008.

Q4 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 79.4 67.8 17.11% 69.4 14.41% 297.2 294.2 1.02
PBT 59.1 53 11.51% 53.3 10.88% 227.8 231.7 -1.68%
PAT 47.2 37.9 24.54% 42.3 11.58% 177.9 165 7.82%
Consolidated Financials (In Crs)
  Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 79.6 67.8 17.40% 69.4 14.70% 297.4 294.2 1.09%
PBT 57.6 53 8.68% 52.7 9.30% 225.6 231.7 -2.63%
PAT 45.6 37.9 20.32% 41.7 9.35% 175.7 165 6.48%

Detailed Results

    1. On a standalone basis, in Q4 FY’20 PAT at Rs. 47.2 crores was up 25% as compared to Rs. 37.8 crores in Q4’19; revenue for the quarter was up 17% YoY largely on account of the increase in overall volumes.
    2. PAT margin at 59%, was up from 56% a year ago.
    3. Starting Q3’20, the company started consolidating results of its wholly-owned subsidiary Indian Gas Exchange and PAT with that inclusion was Rs. 45.6 crores during the quarter.
    4. For the full-year FY’20, on a standalone basis, the company recorded a 1% increase in revenues, PAT increased by 8% with a PAT margin at 60%.
    5. IEX reported a robust 40% YoY electricity volume growth in Q4 FY’20 from 9,908 MU in Q4 FY’19 to 13,835 MU in FY’20. TAM volumes increased by 89% YoY.
    6. Distribution companies leverage attractive prices on exchange to accrue significant financial savings as well as supply 24*7 uninterrupted power.
    7. All set to launch Real-Time Market on June 1, 2020, and India’s first Gas Exchange soon.
    8. All India’s electricity demand bounced back in Q4 FY’20 with a 1.6% YoY growth after a decline of 5.9% in Q3 FY’20.
    9. From a full-year FY’20 perspective, the power sector was characterized by muted electricity demand growth of 1.3% YoY, due to headwinds on account of several unprecedented developments related to economic and industrial growth slowdown as well as weather-related changes.
    10. India’s total installed power capacity reached 370 GW as on March 31, 2020, with renewable energy comprising 24%.
    11. In line with India’s commitment to the Paris Agreement to increase the share of green energy in the overall energy mix, the renewable capacity grew 12% YoY in fiscal year 2020 and reached 87GW as on March 31, 2020, whereas thermal capacity increased only 2% YoY.
    12. The southern distribution utilities continued their preference for TAM contracts.
    13. On the price front, the day-ahead market saw an overall decline in prices by 14% during Q4 FY’20.
    14. Attractive prices helped the commercial and industrial consumers increase procurement by 41% during the same quarter. Including REC, total volumes increased by 29% YoY.
    15. For the full fiscal year 2020, IEX reported 3.2% YoY growth in electricity volumes. The electricity volumes increased from 52,189BU in FY’19 to 53,862 MU during FY’20.

Investor Conference Call Highlights

  1. Volumes in FY21 YTD till 13th May were up 8.1% YoY. The month of April was a slow start as the lockdown was intense during the month. The Peak electricity demand in April fell by 25%. However, volumes fell only by 6.6%. Peak electricity demand has recovered a bit in the month of May and volumes have gone up 50%.
  2. Real-Time Market (RTM) is about starting from the 1st of June.
  3. Management expects that immediate conversion will happen from deviation settlement and mechanism volume, which is about 20 billion units.
  4. And within a couple of years, a large part of that Deviation Settlement Mechanism (DSM) will get converted into a real-time market.
  5. Since distribution companies have become very price-sensitive so they will use real-time market also for the purpose of optimization. So DSM is not the only thing where management expects volume coming into RTM. There would be some additional volume, which will come from optimization as well.
  6. Transaction charges for RTM look to be the same as in the case of the intraday market.
  7. For LDC, the management has not yet finalized anything as it is still far away.
  8. The company says most of the distribution companies are geared up for the Real-Time Market.
  9. Management says that 80%, 85% of the states are directly dealing with IEX and creating the capacity to participate on the RTM platform immediately.
  10. In power, high demand comes in Q2, particularly in the later part Q2 and early part of Q3, and Q4 demand starts to pick up only in the month of March.
  11. In Q4FY20, On the sales side, there was good participation from distribution companies. Wherever, because of diversity in demand and supply, across the country, there are many states who were surplus during those 3 months.
  12. As distribution companies were selling very aggressively, prices were low. And since the prices were low, there was huge participation coming from open also.
  13. On the buyer side, it is state participation and also open access. The state was limited because there are very few sites where they have good demand in Q4.
  14. Buyers on an average basis, for the last year, it was about 30% from open access and 70% from distribution companies.
  15. The government has been trying to shift the energy mix of gas — increase the adoption of gas in the overall energy mix from a 6 percentage point of today to 15 percentage points over the next couple of years.
  16. The spot market for gas already is about 30% of the total market today. And IGX aspires to be the first couple of percentage points of that market in the first year of operations.
  17. While the company intends to move into derivatives in the electricity side, but not on the gas side.
  18. The benefit of Direct Subsidy Transfer goes directly to the consumer so the management does not see any impact of this on the industrial tariffs.
  19. Maharashtra is the biggest consumer of electricity in the country today, and Gujarat is #3 or #4.
  20. Gujarat is a state where there is absolutely no deficit of power. In fact, as per management, Gujarat was the only state, which declared it as a surplus state about 5, 6 years back.
  21. In Gujarat, you have all the 34 distribution companies that are positive. So they are making money by selling power, which is not the case with most of the distribution companies and states in the country.
  22. Annual fees booked in the quarter was Rs 5.5 Cr.
  23. The company expects the green market launch to happen sometime in Q2. They are awaiting the awaiting amendments from the regulators.
  24. Cross-border is awaiting final regulations from the Ministry of Power. It needs a bit of vetting by the Minister of Commerce as well.

Analyst’s View

IEX is the first and largest energy exchange in India providing a nationwide, automated trading platform for physical delivery of electricity, Renewable Energy Certificates, and Energy Saving Certificates. It has a very asset-light business model and a strong Balance Sheet. In the last several years it has done well by constantly adding new products and improving offerings for the participants on its platform. With the share of renewable energy rising in the total energy consumption, the future of IEX looks very exciting. However, it seems that competition in this sector is also increasing at a rapid pace. It remains to be seen how the whole COVID episode plays out to understand its impact on IEX. However, the company seems to have the financial muscle to tide over the disruption of COVID. It is still very early days in the power exchange market. However, as on the date, IEX looks like a pivotal player in this industry.

 

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