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In-line 4Q; volume growth guidance robust

* 4Q largely in line: Indian Energy Exchange (IEX) reported 4QFY26 standalone revenue of INR1.7b, missing our est. by 4.7%. EBITDA came in at INR1.5b, in line with estimates, supported by traded electricity volumes of 39.4BUs and 7.2m RECs, which were also in line with expectations. Standalone PAT was 4% below our est. at INR1.2b, primarily due to low other income. For FY26, revenue/PAT stood at INR6.1b/INR4.7b, both up 14% YoY, and traded electricity volume increased to 141.1BUs (+17% YoY), while 18.7m renewable energy certificates (RECs) were traded (+5% YoY).

* Key things we liked about the result: 1) IEX reiterated its electricity volume growth guidance of 15-20% YoY; 2) implementation of market coupling for the Day-Ahead Market (DAM), earlier targeted for Jan’26, remains pending with no formal timeline announced yet; 3) DAM’s share in the IEX’s electricity volume mix declined from 56%/52% in FY23/FY24 to 44% in FY26, indicating improved diversification and reduced exposure to DAM-specific market coupling.

* Key monitorable: Market coupling overhang across DAM, real-time market (RTM) and other segments and its potential impact on IEX’s market share.

* Valuation: We value IEX at 24x Dec’27E EPS and reiterate our Neutral rating on the stock with a TP of INR140.

EBITDA and volumes in line Financial Performance

* IEX’s 4Q standalone revenue missed our est. by 4.7%, coming in at INR1.7b (+21.9% YoY, +19.7% QoQ). EBITDA came in line with our estimate at INR1.5b (+21% YoY, +23% QoQ).

* Electricity and REC volumes for the quarter stood at 39.4BUs and 7.2m, respectively, in line with our estimates.

* Standalone PAT stood at INR1.2b (+10.7% YoY, +7.7% QoQ), missing our estimate by 4%, primarily due to lower-than-expected other income.

* The board approved a final dividend of INR2/share for FY26. Operational performance:

* Electricity volumes rose 24% YoY to 39.4BUs in 4QFY26, the highest ever in a quarter.

* RTM segment drove the growth, increasing 48% YoY.

* DAM and Green Market segments also reported strong growth of 24% and 27%, respectively.

* Volumes in the REC market grew 6.4% YoY to 7.2m certificates.

* IGX recorded gas volumes of 76.8mmbtu in FY26, up 28% YoY, while PAT grew 35% YoY to INR419m.

Highlights from the management commentary

* Management maintained volume growth guidance of 15-20% going forward.

* The Central Electricity Regulatory Commission’s (CERC) Jul’25 order proposed round-robin among exchanges, while draft regulations issued in Apr’26 proposed Grid India as the sole market coupling operator (MCO) for price discovery, and exchanges retain settlement functions. Market coupling in RTM lacks global precedent, implying low feasibility.

* IEX is awaiting approval for 1) 11 months term-ahead market (TAM) contracts, 2) Green Market RTM and 3) peak power DAM and RTM instruments.

* IEX’s stake reduction in IGX to be concluded by 31st Dec’26 and IGX’s IPO process is progressing well.

* Approval from CERC for aligning the green contracts with the revised renewable consumption obligation (RCO) framework is awaited; this should clarify RE transactions and boost renewable participation.

Valuation and view

* We maintain our Neutral rating. Our TP of INR140 is based on the following:

* We value the business at 24x Dec’27E EPS of INR6, slightly lower than long-term average P/E of 28x.

* We have not assumed any value for IGX's stake in our valuation.

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