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Sustained volume momentum

In Q3FY25, Indian Energy Exchange (IEX IN) demonstrated robust performance with a 16% YoY increase in total electricity volume to 30BU, driven by strong growth across segments, including a 30% rise in Real time market (RTM) volume to 9,322MU and a 311% surge in Green-Day Ahead Market(G-DAM) to 2,385MU. There was a 49% dip in Term Ahead Market volumes. Green-Term Ahead Market grew 187% YoY, highlighting momentum in energy trading. Revenue rose 14.5% YoY to INR 1,321mn, with EBITDA and PAT up 15% and 16.9%. IEX is actively expanding its product portfolio, with regulatory approvals pending for green RTM and an 11-month LDC contract. Plans to introduce Carbon Credit Certificate trading further position IEX as a leader in sustainable energy solutions. Reiterate Buy with TP retained at INR 220.

Volume momentum continues:

Total electricity volume on IEX increased 16% YoY to 30BU in Q3. The RTM segment registered a volume of 9,322MU in Q3, up 30% over Q3FY24. The DAM segment registered total volumes of 16,712MU in Q3FY25, an increase of 14% versus Q3FY24. Total volume on TAM in Q3 was at 1,960MU, a dip of 49% YoY. Total volume on G-DAM in Q3 was 2,385MU, a growth of 311% versus Q3FY24. Total volume on G-TAM in Q3 was 86MU, a growth of 187% over Q3FY24. Market clearing price in the Day Ahead Market for the quarter averaged INR 3.71 per unit, down 26% YoY due to ample supply liquidity.

Robust Q3 led by healthy volume:

IEX reported healthy Q3, largely in line with our estimates. Revenue increased 14.5% YoY to INR 1,321mn, driven by robust trading volume. EBITDA rose 15% YoY to INR 1,131mn. Operating margin remained at 85.7% in Q3FY25. Other income went up 10% YoY to INR 285mn. PAT was up 16.9% YoY to INR 1,073mn. PAT of the subsidiary, Indian Gas Exchange increased 13% to INR 83mn in Q3FY25.

Foray into new product segments to drive volume:

IEX is broadening its product offerings, with regulatory approvals awaited for new products. It is awaiting approval for its 11 month long duration contract which can unlock substantial volumes, with an estimated 40bn units of market potential. It has filed a petition in CERC to launch Green RTM. CERC has issued draft procedures for trading Carbon Credit Certificates, for both obligated as well as non-obligated entities through power exchanges. This should result in trading of Carbon Credit Certificates on IEX, in the near future.

Reiterate Buy with TP retained at INR 220:

We retain our positive outlook on IEX, given the rise in short-term power market share in India along with an increase in market share of power exchanges. Also, IGX and the upcoming Carbon Credit Exchange offer an edge to investors. We expect an earnings CAGR of 18% in FY24E-27E. We reiterate Buy with DCF-TP retained at INR 220.

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