Why IEX Share Price is Rising

India's energy use is surging due to booming industries, rising living standards, and a rapidly growing, urbanising population.

These factors drive demand for electricity, appliances, and transportation fuels.

Take a look at the chart below to understand the growth in Indian energy consumption:

Indian Energy Consumption Growth Chart

One of the biggest beneficiaries of this rapid rise is the Indian Energy Exchange (IEX).

IEX is India's premier energy marketplace, providing a nationwide automated trading platform for the physical delivery of electricity, renewables, and certificates.

No wonder, IEX's share price is on a steady climb. In the last six months, its share price surged more than 15% and in the last five days, it rallied more than 9%.

Let's delve into the potential factors driving IEX's upward trend, exploring both the company's performance and broader market forces.

#1 Good Financial Performance

For FY24, the company's total revenue surged over 16% year-on-year (YoY) to Rs 5.5 billion (bn), driven by a significant rise in other income streams.

This momentum translates to the bottom line as well, with net profit climbing 14% to Rs 3.5 bn. Fueling this growth is the rising power demand, with increased energy unit transactions boosting IEX's profitability.

Adding to the good news, the company declared a final dividend of Rs 1.5 per share for FY24. The impressive results solidify IEX's position as a key player in India's dynamic energy sector.

#2 Good Operational Performance

For the first time, IEX surpassed the 100 billion unit (BU) mark in total trade volume, reaching a historic high of 110 BU - a 13.8% YoY increase.

Electricity trading itself surged 12% to 101.7 BU, reflecting India's growing appetite for power.

IEX championed renewable energy by facilitating the trade of 7.5 million (m) renewable energy certificates (RECs) - a significant 26% increase compared to the previous year.

The momentum continued into Q4 FY24, with a stellar 15.7% rise in overall trading volume across all segments, reaching 30.1 BU.

Notably, REC trading witnessed a phenomenal 98% YoY jump in the quarter, demonstrating a strong commitment to clean energy solutions.

What Next?

India's booming economy, with a projected substantial GDP growth, is electrifying the nation's energy sector.

Industrial expansion across core sectors, electric vehicles, and clean cooking solutions are all sparking a surge in electricity consumption. This creates a crucial opportunity for the power sector to expand capacity.

Supplying electricity to millions in villages has ignited a nationwide demand boost. Meanwhile, cities crave constant power to fuel their growth, which has also created a dynamic landscape for the power sector.

India's ambitious target of achieving 50% non-fossil fuel-based electricity generation capacity by 2030 presents a significant opportunity for IEX. Thus IEX finds itself in the middle of strong tailwinds of demand.

The management is gearing up to take advantage of these tailwinds. The company is undertaking innovative solutions like liquidity infusion schemes.

It is also focusing on providing choices to consumers. Their platform offers various market segments (short-term, day-ahead) and transparent price discovery.

This fosters competition and potentially lowers prices. IEX also enables innovation in electricity purchasing options.

Furthermore, IEX recognizes the crucial role of electrification in decarbonization. IEX helps optimise grid operations and reduce reliance on fossil fuel-based power plants to meet peak demand fluctuations. This can lead to lower overall carbon emissions.

Thus, IEX is aligning its efforts with government initiatives to make the most of the growing opportunity in the power sector.

For more on IEX, check out the below video where Co-head of Research at Equitymaster, Tanushree Banerjee compares IEX with other Indian leading exchanges.

How IEX Share Price has Performed Recently

In the past five days, shares of the company have rallied more than 9%. In the past six months, it is up 15%.

In 2024 so far the stock has declined 5%. However, in the past year it is up by 2%.

The stock touched its 52-week high of Rs 173.3 on 01 January 2024 and a 52-week low of Rs 116 on 9 June 2023.

About IEX

The IEX is an Indian electronic system-based power trading exchange regulated by the Central Electricity Regulatory Commission (CERC). IEX started its operations on 27 June 2008.

It pioneered the development of power trading in India. It provides an electronic platform to the participants in the power market - state electricity boards, power producers, power traders, and open-access consumers (both industrial and commercial).

Ever since its incorporation, it has held an influential market share, of more than 90%. IEX operates a day-ahead market based on closed auctions with double-sided bidding and uniform pricing.

To know more about the company, check out IEX fact sheet and IEX quarterly results.

For a sector overview, read our power sector report.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...