IEX shares suffer a shock as Centre pushes for market coupling in power space

Currently, according to the analysts, National Load Dispatch Center (NLDC) is acting as the market coupler – for a very small portion of the market, but now they expect the organisation to become a full-fledged market coupler role.

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Shares of India Energy Exchange (IEX) plunged on June 9 after the government came out with a directive to speed up the consultation process and finalise the implementation of market coupling.

The introduction of a full-fledged market coupler implies an independent third-party will collate all buy or sell bids and derive a uniform market price across all exchanges. This is a big negative for IEX, analysts said.

According to them, the National Load Dispatch Center (NLDC) acts as the market coupler for a very small portion of the market, but it will now become a full-fledged market coupler role.

IEX is the most trusted platform for price determination in India, hosting over 90 percent power deals in the country, which is its business moat. The new directive “potentially negates” the moat, as other exchanges can eat into its market share over time, said Subhadip Mitra, an analyst with Nuvama.

In fact, IEX has lost a chunk of the market pie with the share down to 89-90 percent last year from 94-95 percent earlier.

The IEX stock traded at Rs 124.20, down 9 percent as of 10am on the BSE. In a large trade on exchanges, one crore shares or 1.2 percent equity worth Rs 122.8 crore changed hands at an average Rs 122 per share.

Nuvama reiterated its ‘reduce’ rating on IEX with a target price of Rs 127.

Antique Broking also downgraded the stock to ‘sell’ with target at Rs 105 per share. The broker highlighted that now the spot market prices will be higher than bilateral prices unlike before.

Possibility of a coupling operator can net the power flow within each zone. Coupling operator will pose a new challenge for dominant exchanges like IEX. Incentives by competitor exchanges like HPX and PXIL can eat into volume growth,” it added in a note.

The IEX management told CNBC TV-18 that it fails to understand why different exchanges within India needed to be coupled and the interpretation of market coupling is also not accurate.

“There is still time for implementation. Power market regulation insists that price discovery will happen at power exchange only. CERC will do stakeholder consultation, and the process will be long drawn. It has to decide if they want to proceed with implementation. CERC will issue a consultation paper and give our comments,” they said.

Market watchdog CERC has licensed three exchanges for trading of electricity.