Indian Energy Exchange (IEX) Result update: Q1FY24
Company Overview:
Indian Energy Exchange (IEX) is a leading power exchange company incorporated in 2007. It operates as a licensed power exchange under the Central Electricity Regulatory Commission (CERC), facilitating spot trading in power and electricity, as well as trading of Renewable Energy Certificates (REC) and Energy Savings Certificates (ESCerts). With a remarkable market share of 94.2%, IEX dominates the power trading landscape in India, particularly excelling with a 99.9% market share in the Day-Ahead Market (DAM) and Real-Time Market (RTM). Expanding its horizons, IEX has also ventured into the gas trading exchange through the Indian Gas Exchange (IGX) and the carbon market via the International Carbon Exchange (ICX).
Products for Trading:
IEX offers a diverse range of trading products, catering to the energy needs of its participants. These products include the Day-Ahead Market for physical electricity trading with 15-minute contracts, the Green Day-Ahead Market for renewable energy trading, the Term-Ahead Market for longer-duration contracts of up to 11 days, and the Real-Time Market, featuring half-hourly auction sessions for power delivery.
Market Participants:
As of June 2023, IEX boasts an extensive network of over 7,500 registered participants, including 60+ distribution utilities, 600+ conventional generators, 1,800+ renewable energy generators, obligated entities, and 100+ ESCert entities. The company also serves over 4,600 commercial and industrial consumers across various sectors, such as metal, food processing, textile, cement, ceramic, chemicals, automobiles, information technology, institutional, housing, real estate, and commercial entities.
Valuation and Key Ratios:
Currently, IEX shares are trading at a multiple of 41.7x, with a current price of 140, while the industry price-to-earnings (PE) ratio stands at 26.3. Additionally, the shares are trading at 15.7 times their book value. The company reports healthy return ratios, with a Return on Equity (ROE) of 39.4% and a Return on Capital Employed (ROCE) of 51.8%.
Q1FY24 Results Updates: consolidated
During Q1FY24, IEX witnessed a 5.7% YoY revenue growth, amounting to 104 Cr, driven by a 7.3% increase in trading volume. The revenue breakdown comprises transaction fees (78%), admission and annual fees (4%), and other income (18%). EBITDA growth was moderate, with a 0.6% YoY increase to 81.5 Cr, primarily affected by a 400 bps YoY drop in margins to 78.4%. This margin decline was attributed to one-time expenses related to Corporate Social Responsibility (CSR) initiatives. Profit After Tax (PAT) grew by 9.6% YoY to 76 Cr, with a significant boost from a 55.1% YoY increase in other non-core income.
Q1FY24 – Concall Highlights: General:
In Q1 FY24, IEX introduced ‘EnergX,’ an online bidding platform designed to offer seamless and secure access to market data insights and simplified financial reconciliation services for all IEX Electricity segments. Notably, other expenses in this quarter included CSR expenses and the 15th-anniversary celebration of IEX, resulting in an additional expense of Rs. 75 Mn. This expense was clarified not to recur in Q2 FY24. As of Q1 FY24, IEX had approximately 1,500 registered participants, with 600-700 actively participating. Additionally, the average clearing price on the DAM in Q1 FY24 stood at Rs. 5.7/unit but decreased to Rs. 4.69/unit in July 2023.
