Didnt they mention in the concall that they are looking for a couple of percent of the gas exchange market? So realistically their revenue should go up by about 10-15 cr not the 200 cr
Yes; Rs200 crores is the potential market size; of which they are targeting 20-25% in the first year.
Can you share the source of IGX charges and whether charges are different for different products or its uniform?
From the earnings call transcript :" So of all the gas that is getting it is about 30% today and we will aspire to be a couple of percentage points on that spot market."
Hopefully they get to 20% but definitely not from the get go. They are competing against sarkari offerings so they should gain market share but that also depends on who has the bargaining power between customers and suppliers of gas.
Customers typically get 30 days of credit when buying through existing mechanisms whereas IGX would give them less than a weekâs credit.
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Highlights from Todayâs IGX Analyst Meet-
- Exchange will be primarily trading LNG; but some domestic gas might come from few offshore fields.
- Dahej and Hazira are two main LNG hubs in India.
- Most companies are currently buying on monthly and quarterly basis in the spot market.
- All major segments like power, fertilizer, CGD etc are already active on the spot market.
- Currently, trading margins are not regulated and do not expect that the same will be regulated going ahead.
- Natural gas is concentrated at 10-15 players on the supply side.
- Expect opex would be 18-20 crores and expecting Rs15-18 crores of revenues in 1st year. (So one should not expect any gains from IGX in this year)
- Cost of tech bought from GMEX is Rs70-80 (not very sure on the number as voice got distorted) and the more tech will be added in phases depending how regulations shape up.
- Looking to bring in a strategic partner into the company very soon. (Biggest takeaway)
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I have two three doubts on todayâs Meet, if you can help us on understanding the same:
- any idea what factors constitute these 18-20 crores opex?
- What will be impact of strategic partner on IGX?
- Whether seller side LNG companies will be more benefited after IGX than IGX itself?
Thanks in adavance
@ankush124945 some additional points from my end
- The revenue structure for IGX is
- Membership fee - Rs 25 Lakh
- Annual fee - Rs 5 lakh
- Client fee - Rs 1 lakh
- Transaction fee - Rs 5 to 7 per MMBTU - Rs 5 on exchange transaction & Rs 7 per exchange + delivered (exchange transaction + delivery) transaction
- IGX is aiming to capture 2-3% of the market in the 1st year, translating into transaction revenues of Rs 4 to 6 Cr for IGX for the 1st year
- As per IGX that there are 10 to 15 gas suppliers and there will be initial resistance from suppliers. Lower cost of gas for industrial users will be a draw for users and but the presence of buyers / users will draw sellers to the exchange
The opportunity and market is immense given the shift in gas demand & consumption. IGX has a first mover advantage. Potential risks in my view are
- Sellers are operating in an opaque market and there could be resistance from sellers. Market discovered prices could have pricing pressure on sellers and given the low entry costs for setting up an exchange a sellersâ consortium could potentially form an alternate exchange to protect their interests.
- Regulatory changes could impact the gas exchange
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Buying tech + hiring employees just to setup another exchange seems inconvenient, it would be easier to not join the exchange and stop supply from entering the exchange.
Maybe this is why IGX is looking for a strategic partner, to counter this effect.
Itâs a prisoners dilemma for the suppliers. If even 1 of them joins the exchange, that 1 would reap all the rewards because of low prices but high volumes, transparency etc. This would drive other suppliers to the exchange.
A strategic partner would be hasten the process of all suppliers coming onboard because then this partner would be the 1st to join, get huge volumes and revenue
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Letâs accept the fact that there is glut of gas in the international markets and it will remain so for the next few years. Domestic gas is not available for trading as it is allocated one. Trading volume will essentially come from importers or the international players selling it through through Indian representatives like Petronet LNG, Adani or even Gail. I think there are enough takers for affordable gas in the country. I donât understand why would an international player come and setup an exchange when they can simply offload in the existing one. Moreover, exchanges have to be a neutral entity and they can not be seen being owned by the customers or suppliers. I think there is future for an independent gas exchange trusted by parties from either side and IEX has first mover advantage here. What we need is massive expansion in pipelines so that more buyers can join the trading network. I think the present govt. is committed to improving infra substantially over time.
Disc:- Invested during recent fall
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GAIL is looking to buy 26% stake in IGX.
GAILâs EOI-
If integreation happens then Win win situation for both. But still in very nescent stage. It will be really interesting to see in future if comapny can build same pillars for other energy forms
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Gail coming aboard is a great step, as it is a major seller in the markets. This will ensure liquidity on the exchange.
The only problem over medium is that there is a good probability that regulations will not allow any single entity to own more than a specific percentage of the exchange, same happened in case of IEX as well and PTC had to divest its stake in IEX.
Hope that in any such event, IEX goes for a listing route by distributing shares to the existing shareholders of IEX.
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What if Integration wonât happens and GAIL come up with its own platform ?
That is very unlikely in my opinion, coz government in already looking to separate GAILâs transmission and marketing business. So i donât think GAIL will be allowed to get into trading side in a major way.
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I came across this in a report by Edelweiss:
âNew exchange to the trading floor: Regulatory proceedings/compliances for a proposedthird exchange by a consortium of PTC, BSE and ICICI Bank are underway. This would pose a medium-to-long term risk to IEX as PTC India accounts for 20% of IEXâs volume as a member.â
Again an article in ET in Augâ19 states :
"The plan for setting up the exchange is on⌠We have applied to the regulator, and it has asked for certain compliances⌠We have replied⌠It is at an advanced stage," PTC India CMD Deepak Amitabh said.
Is there any way we could track the developments regarding as to when these approvals may be cleared, as this could certainly impact numbers, given PTCs quamtum of trade on the exchange alone.
Further having ICICI and BSE as a partner may further aid the proposed exchange to capture the market built by IEX over the years.
If someone has some details on the same, it would be most helpful.
Thanks!
BSE and ICICI join venture exchange news quit old⌠I was reading on 2019 After that no news⌠but IEX is going on perfect pace ⌠itâs far ahead of competitorâŚIGX also will contribute Top line growthâŚnow IEX looking for cross border tradingâŚ
Dis⌠invested . Looking for add more on decline.
PTC was actually a promoter of IEX, but due to regulations a trading licensee cannot hold more than a certain % (~5 is the limited i guess). So even if PTC and BSE do launch it, they will have to sell their stake in near term. So i donât think there will be a very big push from PTC and BSE.
Plus, if PTC would have control over volumes, they would have tried to drive it to PXIL (backed by NSE). But PXIL volumes today even after 10 years of operations is less than what IEX did in 1st year back in 2009.
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