IEX shares hit 52-week low on govt's push for market coupler in power sector

Shares of the Indian Energy Exchange declined as much as 14.9% to hit a 52-week low of ₹116.05 apiece on the BSE on Friday, a day after the government reportedly asked CERC (Central Electricity Regulatory Commission) to initiate the process of market coupling in the power sector. The market coupling means the formation of a single entity for power trading, which will be owned by the government.

On Friday, the scrip opened lower at ₹127.60 against the closing price of the previous session at ₹136.50. At 12:56 pm, the share price of IEX was trading 10.51% lower at ₹122.15. In the past two trading sessions, the stock has declined more than 22%. At present, the share price of IEX is trading 34.1% lower than the 52-week high of ₹185.50, which the exchange touched on June 9 last year. During the session, the company’s market capitalisation stood at ₹10.981.74 crore, with 86,93,338 shares exchanging hands on the BSE against the two-week average of 6.51 lakh shares. The data by Trendlyne, a stock market data analysis platform, shows the stock has declined as much as 28% in the past year.

Following the development, analysts see a negative outlook for IEX. Brokerage firm Nuvama has recommended a ‘reduce’ rating for IEX and revised the target price of ₹127. Nuvama has called a "big negative for IEX."

According to Nuvama, the market coupler will collect the buy and sell orders from all power exchanges and will ensure uniform market price. This will significantly reduce the market share of IEX. It currently holds a market share of 99.9% in power trading.

Earlier this week, IEX said the exchange has achieved 8,251 million units (MUs) overall volume in May 2023, including green market trade of 358 MU, 1.42 lac RECs (equivalent to 142 MU) and 2.02 lac ESCerts (equivalent to 202 MU). The overall volume during the month was higher by 8% on YoY basis. The price during May 2023 was ₹4.74/unit, declining 30% YoY, from ₹6.76/unit in May 2022 due to an improving supply side scenario leading to increased liquidity, as well as cooler weather conditions, according to the exchange.

"While the increase in power demand is expected in the coming months, the supply side liquidity is likely to further improve due to enhanced coal supply, reduction in e-auction coal prices, and consistently declining imported coal and gas prices. This will lead to competitive prices and higher clearance for Discoms & Open Access consumers," the company said.

The Day-Ahead Market (DAM) volume increased to 4,066 MU in May ‘23 from 3,224 MU in May '22, growing 26% YoY. The average market clearing price was Rs. 4.74/ unit during the month, lower by 30% over the corresponding month last year. The Real-Time Electricity Market (RTM) achieved the highest-ever monthly volume of 2,424 MU during May23, registering 13% MoM and 5% YoY growth. There were 719 participants in this segment during the month. The consistent growth of the RTM segment reflects its increasing acceptance among distribution utilities and industries to efficiently balance their power demand-supply on a real-time basis.