Hold Indian Energy Exchange Ltd For Target Rs.135 - Prabhudas Liladhar Capital Ltd
Volume-led beat aided by RTM; coupling risk lingers on
IEX reported Q1FY27 PAT of INR 1,267 mn, up 12% YoY, with electricity volumes at 37.5 BU, up 16% YoY, led by RTM. On market coupling, IEX's plea against the APTEL order has been admitted for hearing by the Supreme Court, keeping the legal route live, while management stayed non-committal on implementation timing given the extent of software, reliability and settlement validation required, extending the runway on the uncoupled earnings base. Diversification is now better dated: IGX filed its DRHP on July 14 for a 22.3% OFS taking IEX's stake to the 25% regulatory ceiling, while Coal Exchange Rules notified on June 4 will route all coal trading including Coal India's eauction through an exchange within six months of the first licence going live, opening a ~120 MT market scaling to ~250 MT by FY35. In the analyst meet, management indicated that they could consider share buyback. The company holds cash and equivalent of INR 13bn and have planned a stake sale in IGX. We retain HOLD rating on an unchanged TP of INR135 (20x FY28E EPS).
In-Line Results, Other income normalises, aiding PAT:
IEX reported Q1FY27 revenue at INR 1,559 mn up 11% YoY, a ~3% beat to PL and consensus estimates. EBITDA was at INR 1,302 mn, up 14% YoY with margins of 83% (v/s 81% in Q1FY26), a ~5% beat. PAT was at INR 1,267 mn, up 12% YoY with margins flat at 81%, a ~5% beat, aided by treasury income normalising to INR 450 mn (v/s INR 220 mn in Q4FY26) after the shortfall that dragged the previous quarter below estimates. Electricity volumes stood at 37,534 MU, up 16% YoY, with RTM share rising to 41% from ~35%. Including certificates, total volumes were 38,512 MU, up only 3% YoY as REC volumes fell 81% on an 86% decline in sell bids.
Market coupling timeline extends:
IEX's plea against the February 2026 APTEL order has been admitted for hearing by the Supreme Court, keeping the legal route live. Comments on CERC's draft regulations proposing Grid India as Market Coupling Operator closed June 5, with a public hearing on June 10; Grid India's own submissions flagged sole-MCO as a single point of failure and suggested a fallback allowing exchanges to carry out price discovery. Management stayed non-committal on timing, citing the software, reliability, security and settlement validation required, and invoking the ABT precedent - discussed in 1994-95, implemented in 2003.
IGX listing and ICX optionality:
IGX reported Q1FY27 gas volumes of 27.5 mn MMBTU, +12% YoY, and PAT of INR 163 mn, +15.5% YoY, on FY26 volumes of 76.8 mn MMBTU and PAT of INR 419 mn. IGX filed its DRHP on July 14 for a pure OFS of 22.3% by IEX, taking its stake from 47.3% to the 25% PNGRB ceiling. On coal, MoC notified Coal Exchange Rules on June 4 with the licence portal opening July 15, and existing e-auction platforms including Coal India's may operate only six months past the first exchange going live - displacing MSTC and mjunction. Management sized the market at ~120 MT today, scaling to ~250 MT by FY35, with exchanges able to charge more than incumbents given clearing and settlement are bundled in.
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SEBI Registration number is INH000000933
