What does this signify?
To me at this point without the management commentary it looks like the decision was not in favour of shareholders thats why it never went through and it does require some rejig in compensation etc
Similar might happen under Zomato too
Looks like his past involvement as one of the large shareholders(TVS capital) made him undesirable as an independent director to present stakeholders…
13% drop in volumes in first 2 weeks is quite substantial…this is exactly the challenge of investing in any monopoly (well, it was almost monopoly for IEX although technically there was 2nd player) business…
Disclosure - invested in the past. No investment now but watching with interest
Curious that they do not say what the exact volumes for HPX are as they say it for IEX .
Prices of units do not have any direct bearing on IEX\HPX earnings as they earn a fixed amount per unit… right ?Anyway its clearly wrong to attribute price reduction solely to competition as monsoon reduces electricity demand and hence price .
While it is no surprise that IEX would lose some market share, I do not think any long term investor can take any decision based on these sort of speculative analysis. It will take a while to get an clear idea exactly how much share HPX would capture eventually . Since they have only a couple of states and a UT under their belt, I do not expect them to increase market share by 20% after every 17 days .
“Awasthy said the new exchange already has a heterogeneous mix of stakeholders, including state-owned private utilities, generating companies and consultants. Power distribution companies of Haryana and West Bengal are already on board to trade electricity; so are the two discoms of RP Sanjiv Goenka group – Noida power and CESC. Among equity partners are Jindal Power, SJVN and Greenko and Manikaran partners, a leading power trader and Mercados Energy Markets, which is a consulting agency, Awasthy said.”
Hindustan Power Exchange backed by BSE, PTC to commence operations | Business Standard News (business-standard.com)
Disc : Invested and watching
Here is my working on HPX & IEX publish data - only for TAM segment comparison
Note HPX do not publish / deal with other market segments like IEX.
Time period is so short and data is so less that atleast I cannot draw any conclusion. Also this news was published on 19th July, I am sure atleast this data do not support the conclusion as per news. May be data I am referring is not complete or news is based on some other data which I could not get.
DateWiseTrade (1).xlsx (455.8 KB)
Does anyone know where we are in regards to these decisions.
- Market Coupling - Has this happened? If no, then whats the plan/inclination of govt regarding this.
- MBED - Phase 1 was supposed to be live in Apr 22 right? This was a politically and technically difficult move, hence has this been implemented? What the plan regarding this by the govt.
SHP of IEX. There is this pattern. After a good company becomes multibagger and valuations become too rich then institutions start selling. Then with each fall in the name of buy on dip, long term investing etc etc retail share holders buy it. I think the way to buy these businesses is either spot them before the rally starts or buy them when they are cheap enough that one can easily do the valuation. If valuation is very difficult then it’s still overvalued.
It is good to see that PPAFS has not reduced. What is good to see is DII have increased with increase coming for mirea
Invested and biased
Hi, just sharing the latest Investor presentation from IEX.
Invested at lower levels & biased
Regards,
dr.vikas
My thoughts on the 3rd Exchange- HPX and the whole narrative around IEX losing its monopoly and margins pressure.
The 3rd power exchange- HPX, promoted by PTC, BSE and ICICI Bank went live on 6th of July. The launch of this exchange has been something that has been talked about a lot with the context that it will reduce IEX’s monopoly and also put pressure on IEX’s transaction fees & thus margins.
HPX has started its operations with two contracts in the TAM segment- Day Ahead Contingency and Green Term Ahead Market.
In these first 20 days, HPX has had zero volumes in G-TAM segment and ~202 million units in DAC contract. Based on these volumes, HPX has taken ~25% market share within the DAC contract. This coupled with the fact that IEX’s volume for the month of July are down (y-o-y), some segment of market is viewing this as signs of pressure on IEX’s market share.
However, our take is different here-
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DAC as a segment is a very small part of overall exchange market. It is a part of TAM segment along with other contracts like Intra-day, Daily and Weekly Contracts. Historically, TAM as a segment has contributed about ~5-7% of IEX’s overall volume.
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TAM as a segment is not driven by liquidity. (Snippet from Q3FY20 Concall)
And because of this nature of this segment, historically as well, IEX never had 100% market share in this segment like it does in major segments of DAM and RTM, both of which are liquidity driven and contributes >80% of IEX’s volumes. PXIL (2nd exchange) historically has survived on this segment (>90% of PXIL’s volumes) and has had good market share in TAM segment.
So, HPX has basically taken some market share in a segment which is very small part of IEX’s volume and is not wherein IEX had monopoly. -
Further, HPX in its 1st month is not charging any transaction fee and will be offering some 20% discounts for next 1-2 months. So, these volumes have been accumulated on the back of non-sustainable pricing.
We had asked IEX’s management in the concall whether historically such discounts on transaction fee have had any impact on shift in volumes. Management said that there have been multiple times in the past when PXIL had tried to restart its DAM segment by offering lower fees, but it never worked. As per the management, more than pricing, the end customer is more worried about trade execution, price discovery and ease of use. -
Also, a lot of people are worried that PTC which contributes large volumes to IEX will shift its volumes to HPX as it has 26% stake in HPX. However, as per regulations, till the time PTC owns >5% stake in HPX, it cannot trade on HPX. And at 5% stake, there is no real value for PTC to shift its volumes.
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Lastly, on the volumes being down (y-o-y) for IEX; launch of HPX has got nothing to do with it. It is again largely because of the supply side issues that have continued.
So based on all the above and our understanding of the business, we believe the narrative that IEX’s will lose its monopoly or will face pressure on its fees does not has any merit.
Disclosure: I am a SEBI Registered Research Analyst. I own IEX and have an active recommendation on the same. Above is a part of my quarterly update to clients on IEX.
Thanks a lot for providing clarity. I too had the same impression that IEX price value is dropping due to HPX, as there will be competition and thereby IEX’s monopoly will get reduced.
Disc: i am invested in IEX and currently looking at accumulating it…
A layman’s question !
Yet to understand how a company having profit of 300 crores can have a market cap of near to 13k croes ?
Do we see a huge runway ahead e.g. company growing at 50 % per annum for many years to come or something else !
PPFAS bought at a lower price and as long as the long term thesis is still intact they won’t sell. They bought Hero motocorp at the end of 2019 auto down cycle. they still hold it.
Disclosure: No holding. Though admire the business model.
Beauty lies in the eye of the beholder.! Stock was trading at 100x PE 6 months ago, still trading at 45x PE. So you may call it expensive (or not), depends on your own analysis.
If we look at the quality of the business and the moat around it (which is what matters in long term I believe), the model looks very difficult to beat.
One of a kind platform with multiple solutions to a region’s energy issues (IEX is providing services to almost all of South Asia now), low transaction cost for customers (2 paise cost on 5 rupee cost/unit, how much discount can the competition really offer) and innovative, prudent & honest management (went for IGX when no one was even talking about it, launching new products, bonus share issue etc).
So the company looks very enticing, valuations is something everyone has to decide individually.
The Q1 conf-call clarified some doubts. The biggest point was in response where it was mentioned PTC can’t trade on HEX. This to me was single most important piece of information.
Invested from lower level. Was is wait and watch mode. Will remain so till HEX launched other segments and we see impact of those launches.
Posting this here, may help in very long term thinking for IEX
With renewables bound to take up majority of grid share in the world in the coming decade, super grids are not just a necessity but inevitable
We are already seeing very very early signs of this, with Bhutan, Nepal and Bangladesh either sourcing electricity from IEX or in talks to do so.
