Very interesting situation in Australian power market. It illustrates role of regulator and exchange in a crisis situation. I think it also shows what may happen when MBED is in place.
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CERC has given a go ahead to HEX. This will be the 3rd exchange. Previous two IEX and PXIL with IEX having almost 95% market share.
HEX is promoted by PTC, BSE and ICICI.
Given that PTC is one of the promoters what do you expect will happen to market share of IEX?
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The peak demand of power in India as of May 2022 is 169 GW whereas the power traded in IEX during the same period is only 6,540 million units. The concept itself is at a very nascent stage in India and there is room for many new such exchanges to co-exist. Being the first mover, IEX would have good insights which can make their platform robust and come up with new products compared to others. If IEX can grow at a pace of 15% - 20% YoY in the next decade, it can be a huge wealth creator.
Disc: invested and waiting for further fall to add more
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What if PTC with all its influence in state discoms asks them to move to HEX?
PTC has 25% stake in HEX only .Also do you have any information that PTC has the authority to do so? They can perhaps decide to sell the electricity they produce on HEX ,but they are not the only RE producer. Even that is doubtful because unless you sell your produced electricity soon enough , its not good for you as a producer . Buyers can choose to go where they have more sellers because that leads to efficient price discovery or cheaper prices .At the moment the crowd is in IEX and only time will tell if HEX fares better than PXIL.
Disc. Invested in IEX from lower levels
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Yes. Basically it’s like NSE & BSE. Though BSE is trying its best, still the trading volumes are much much higher on NSE, which has the first mover’s advantage.
It’s also something like CRISIL, which is and will remain the leader in the credit rating agencies.
So IEX market share will eventually come down in future but still it will remain the market leader.
Unless and until government does some major regulatory changes, this will be an excellent dividend play in future.
Dis: Invested in IEX on lower levels.
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BSE is the oldest stock exchange in Asia, and also the tenth oldest in the world.
Yes. True. But NSE had the technological first mover advantage like derivatives etc.
So though BSE is oldest, volumes are much higher on NSE
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NSE started in 1992 and did electronic trading from the first day. BSE launched their electronic platform in 1995 .
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I agree , IEX can be consistent compounder at 20 to 25 pc if govt policy doesn’t change earnings of IEX. I strongly beleove like MCX amd NCDX case IEX continues to be marke eader having 75 pc plus market share.
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Hello everyone. I did a few calculations to project IEX’s Sales, Operating Profits, Net Profits, EPS and Price by 2032 based on some data shared by @Tar in a recent webinar.
I used the Median P/E from screener.in
Thanks
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Were your assumptions base case or bull case?
The simple logic about IEX is
- Through IEX you can participate in India Growth story. With so much of capex coming online, more energy will be required.
- Through IEX, being a trading platform, you can play all energy themes - coal, oil, gas, wind, solar etc.
- IEX will be market leader in future also. HOW?
I have 2 exaplmes in front of me
1 - NSE is market leader in derivatives segments and how much ever BSE tries, its difficult for BSE to achieve NSE scale
2 - In rating agencies, CRISIL is the market leader and will remain the same even though its market share has come down.
So now it boils down to the valuations - which are totally subjective. So each person has to take his /her own call.
But in general, I feel its has a big size of opportunity ( as Bharat Shah says) & very long runway ( as Mohnish Pabrai says)
Government regulation is the biggest overhang, so you have to play it with your own portfolio allocation.
Dis - I am invested since lower levels & so BIASED.
dr. vikas
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Finally the 3rd exchange is live Hindustan Power Exchange begins operation
I know I have been posting antithesis…however I am invested from lower levels.
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My calculations as per Pat Dorsey’s Reverse DCF model.
Assumed Values: Discount rate, growth rate, & exp fcf growth rate.
What affects these assumptions?
- Discount Rate: Assigning a discount rate is an “Inexact Science”. There is no right discount rate for any company. Generally, large & stable companies get 9%, average companies get 10.5%, very high risk companies get 13-15% discount rate. One should assign discount rate by looking at company’s size, debt, cyclicality, economic moat & management.
- Growth Rate: In the very long run, we can safely assume that the company will grow at respective country’s GDP growth rate.
- exp fcf growth rate: This depends upon certainty of the cash flows in the said time.
Any suggestions & queries are welcome.
Disc. Invested.
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How is a 6x in 10 years equal yo a 58% CAGR?
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IMO MBED will reduce market share in terms of % but in terms of revenue and growth it will be significant. 80% of 100 = 80 and even 40% of 200 is 80… So to even maintain current numbers of revenue and profitability, TAM has to only 2x.
If we look at @Prathamesh_Nalawade concall numbers, market is expected to to 25% as ST. Currently at 7%. 80% of 7% is 5.6% of total energy market vs 50% of 25% = 12.5% which is also a 2.2x easy on current numbers. This only assumes 50% share which I think in the initial phase is conservative at least in the initial roll out of MBED.
IEX has been focusing too much on tech and it has built in ALL the efficiencies over the years, it’s not easy for anyone to setup shop newly and directly target 10-15% market share, it takes time. In that manner, IEX has a solid first mover advantage.
Disc: A complete newbie, my general thoughts, have a small position.
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MBED in all but essence dead, regulator has stopped moving the needle on it.
IEX instead is launching voluntary version of MBED for its customers.
D: Invested
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