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Good volume growth, but risk from market coupling

IEX reported Q4FY26 PAT of INR 1,240 mn, up 11% YoY, was below our and consensus estimates by 8%. This is driven by lower other income. Total volumes for 4QFY26 were 46.6 BU, up 21% YoY, driven by growth across all products barring TAM market, with this FY26 volume stood at 160 BU, up 15% YoY. To tackle the risk of market coupling company is now diversifying its portfolio by entering in proposed ICX (Indian Coal Exchange). IGX and the proposed ICX offer IEX diversification beyond electricity, reducing dependence on power volumes and mitigating market coupling risks. CERC has released draft on market coupling. Though actual timeline is delayed but still remains on cards. Given the expected moderation in volume growth to ~10% post market coupling from ~20% CAGR over FY20–25, we believe IEX is likely to trade at a lower valuation multiple versus historical levels. We retain have ‘HOLD’ rating with TP of Rs135, based on 20x FY28E EPS.

In-Line Operating Result, lower other income impact PAT:

IEX reported Q4FY26 revenue at INR 1,722 mn up 22% YoY and is in-line with our and consensus estimates. EBITDA was at INR 1,476 mn, up 21% YoY with Margins of 86% flat YoY, was in line with our and consensus estimates, but PAT was reported at INR 1,240 mn, up 11% YoY,was slightly below our and consensus estimates by 8% mainly due to due to lower other income and increase in depreciation cost. FY26 volume stood at 160 BU, up 15% YoY. Company declared final dividend of INR 2 per share, with this total dividend declared for the year stood at INR 3.5 per share, with dividend payout ratio of 66% and yield of 3%

IGX growth & IPO Outlook:

For Q4FY26 IGX reported gas volumes of 18.6 mn MMBTU - 8% YoY on account of supply disruptions in the Middle East. For FY26, IGX traded gas volumes of 76.8 mn MMBTu (1935mmscm), +28% YoY, led by demand from domestic gas producers, heightened power demand, and demand from city gas distribution. Diversified supply from LNG and domestic players like ONGC and Reliance Industries adds resilience. While near-term volumes may remain weak, recovery is expected from Q2. IGX reported PAT of INR94mn +5.4% YoY and FY26 PAT of INR INR 419mn +35% YoY. IEX owns ~47% in IGX, and thus, profit from the associate contributes to ~3% to IEX PAT. As per regulations, IEX needs to bring down its holding to 25%, and IEX expects IPO of IGX in CY26.

ICX potential optionality:

ICX can act as a critical diversification lever for IEX, especially amid uncertainty from market coupling in power exchanges. By entering coal trading, IEX taps into a large, underpenetrated spot market (~15% of coal trade), reducing dependence on electricity volumes and regulatory risks tied to price discovery. The shift to a multi-buyer, multi-seller coal ecosystem and potential routing of e-auction coal through exchanges could unlock meaningful transaction volumes and fee-based revenues.

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