Indian Energy Exchange (IEX)

Hi Dr. Vikas,

As you mentioned - no doubt it is a great business with excellent margins and ROCE/ROE. Also the the business is still in early stages with growth visibility for years to come (regulations could play spoilsport, but investing is a game of probability).

What has started to bother me is the change in the macro environment, particularly FED raising rates. With no debt and asset light model, neither interest rate nor inflation would impact IEX business, however rising interest rates have made me wonder about sustainability of lofty valuations. I read a newsletter from Monarch AIF (it is available in public domain) about the NIFTY 50 and their fate in the US in 1970, which has raised some pertinent questions.

In my case, IEX has one of the highest allocation (my purchase price is 67 adjusted to bonus and I dont trim winners - hence the allocation has increased significantly) and if it does not perform, it will have implications of opportunity cost for me.

Thus it is a question of valuation comfort, allocation, fear of losing the paper gain - multiple aspects for me. Regardless of whatever I do in the coming days, I am sure I will learn good lessons here!


Approval of interim dividend of Rs. 1/- per equity share.

IEX.pdf (3.5 MB)

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Yes valuations are the reason I have exited. I see opportunity cost in not allocating the amount to other more better value opportunity. The expectations for growths built in this valuation simply seem optimistic and narrative seems to be on how to justify it.

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In IEX Sales = Profit before tax and soon as Other Income grows, Profit before tax > Sales, as the addressable market continues to expand. Two cautions though: 1. Don’t know how long that can continue as competition emerges 2. Margin of safety in valuations.


The Indian electricity market will have a new platform that could let any one buy, sell or trade electricity – both conventional (coal, gas hydro) and renewable energy (solar, wind). The over-the-counter (OTC) market allows buyers and sellers to directly transact electricity, and negotiate the price and contract.

“At present, trading licensees are in place who can promote market for exchange of power. However, there is no platform for facilitating direct interaction between the buyers and sellers in the OTC market. In our view, there is a necessity to provide for a regulatory framework to promote the OTC market through direct participation of buyers and sellers to explore the untapped sources of power to meet the consumer needs,” it said in the order.

Disc - No investments.

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Power ministry has notified today that Green Hydrogen / Ammonia manufacturers may purchase renewable power from the power exchange or set up renewable energy capacity themselves or through any other, developer, anywhere.
To produce Green hydrogen, Renewable energy from Solar / Wind sources is a must - it is a

So the Green hydrogen manufacturers have a choice - either to put up solar/ wind plant or purchase it from power exchange.
IEX may be allowed to trade Green hydrogen / Ammonia. We will have to wait and see any such announcement from IEX in this regard.
Please see the post in Green hydrogen thread.


Hey just wanted to know one thing. Is this Electricity OTC market a good or bad thing for IEX?
If so, the how?


Undoubtedly IEX is clear winner for next 3 to 5 years by the time new exchange comes up. In my view

  1. Even if new exchange comes up market size is so big that unlikely to eat up IEX market share.
  2. Technology wise iex will be much ahed than others .
  3. By introducing new derivatives and green contract Products IEX will be always ahed from competitors.
  4. Gas exchange valuation will also catch up and will add upto valuation of iex as a holding co.
  5. As per govt policy DISCOM has to compulsory by 25pc of power through power exchange. This will open a very big market for power exchange. I believe volume at iex could be double or triple in next 2 to 3 years.


  1. Profitability may be get impacted if any adverse govet policy comes up.
  2. Some serious competition comes up otherwise it could be like MCX and NCDX case. MCX today also enjoys 85pc mkt share in commodities volume.

My views may be biased as invested at much lower levels.


the simple thing is that exchanges dont go to consumes or buyers sellers rather they go to exchanges. buyers and sellers go to where there liquidity is. imagine a buyer or seller with big volume then at which exchange trade going to be done, where there is big seller or buyer or newer exchange? also IEX is backed by better tech than any other peer currently exists. better liquidity to buy or sell big volume backed with superior tech which leading to efficient price discovery left no confusion about incoming relatively new player. one more fact is that bigger and efficient player keep becoming bigger and better with time and newer and inefficient player extinct with time. imo only anti thesis is govt regulation which i think is hugely in favour of exchange concept and not going to harm any exchange in near term. any negative regulation going to hurt every exchange in the market not the only bigger or older one, if this happen weak players going to extinct for forever.

D: invested.


Indian Gas Exchange IPO in the offing - The Hindu BusinessLine


With this IPO, IEX plans to reduce its current stake from 46% to 25% in IGX !

Whether the IEX share holders would get a preferential allotment in IGX IPO needs to be seen.


Even though bringing down the stake in IGX to 25% is a regulatory requirement, there are lot of positives for IEX in this move:

  1. It will help monetize the stake in IGX (though we don’t know if it would be fresh issue or OFS or a combination).
  2. It will bring sharp focus to IGX business as a separately listed company with independent management and public scrutiny.
  3. It will allow IEX to focus on its core business.
  4. Being associate companies, both IEX and IGX will continue to benefit from the business synergies.
  5. It will release IEX from need to fund future IGX plans.
  6. On listing, there will be a one time gain (am presuming so) on MTM basis. (IEX BV will go up).

As per IEX chairman, IEX still has 3.5 years before they are required to offload the extra 21-22 percent stake in IGX. Development of IGX is definetely a positive for IEX but the stake sale is happening way before IGX is given a chance to grow and mature.

Selling equity to strategic partners like Adani,torrent,ongc,iocl,nse makes sense but would it not be better to do that in the last year of deadline to get better value for IGX?


Or selling now so that you have the equivalent of vendor lockin of at least assured trades from the same players as compared to other Xchge players who mature in 3 years and offer huge discounts to get the same pool of producers and consumer initially; at that time you probably can’t charge premium valuations as there are choices for the participants?

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I think IGX went from being subsidiary to being an associate by virtue of this transaction.


Interesting read