Why IEX Share Price is Rising

India's energy consumption is expected to increase three to four-fold in the coming decade.

This growing power consumption has led to an increased need for efficient power trading platforms.

Indian Energy Exchange (IEX) plays a crucial role in this sector, providing an automated trading platform for the physical delivery of electricity, renewables, and certificates.

The recent surge in the IEX share price caught the attention of investors.

The stock rallied 8.7% in the past month.

With IEX's share price once again in the investor limelight, let's delve deeper to find out what's driving this recent surge.

#1 Healthy July Update

IEX achieved a record total volume of 13,250 MU in July 2024. This includes certificates and marks a 56% year-over-year (YoY) increase. Electricity volume reached 10,093 MU, rising 29% YoY.

Green electricity volume hit 1 BU, growing 259% YoY. Renewable energy certificates (REC) stood at 3,150 MU, increasing 405% YoY.

REC prices dropped to Rs 120 per certificate in the trading session on 31st July 2024.

Government data from July 2024 showed that energy consumption in India reached 145.4 BUs, up 4% YoY.

Day Ahead Market (DAM) volume rose to 5,056 MU in July 2024, up from 3,976 MU in July 2023, a 27% increase YoY.

Real-Time Electricity Market (RTM) volume increased to 3,334 MU in July 2024, from 2,540 MU in July 2023, a 31% rise YoY.

Day Ahead Contingency and Term Ahead Market (TAM) traded 712 MU in July 2024.

IEX Green Market, including Green DAM and Green TAM, achieved a volume of 989.6 MU in July 2024. This is up from 275.4 MU in July 2023, a 259% increase YoY.

Weighted average price of the Green DAM was Rs 4.3 per unit. IEX Green DAM recorded an all-time high volume of 50 MU on 28 July 2024.

IEX demonstrated strong market demand and operational success in July 2024.

The record trading volumes and significant growth in various market segments are boosting its share price.

#2 Strong Quarterly Results

During Q1 FY25, IEX recorded a total trading volume of 30.4 BUs, up from 25.1 BUs in Q1 FY24, a 21.1% growth YoY. This includes 28.2 BUs of electricity and 2.2 BUs of certificates.

Led by strong volume growth its consolidated revenue grew 21.3% YoY, rising from Rs 1.3 bn in Q1 FY24 to Rs 1.5 bn in Q1 FY25. Its profit after tax increased 27.2%, from Rs 0.8 bn in Q1 FY24 to Rs 1 bn in Q1 FY25.

The hot weather led to a surge in electricity demand in Q1 FY25. Peak power demand hit 250 GW, surpassing the previous high of 243 GW in September last year.

Energy consumption was 452 BUs in Q1 FY25, 11.2% higher than the same quarter last year.

Coal production increased by nearly 11% YoY to 247 m tonnes. The auction premium under Shakti B8 has been around 20% for the last three months.

Government and regulator measures increased sell liquidity on the exchanges. This kept prices under control despite higher electricity consumption.

The market clearing price in the DAMduring Q1 FY25 was Rs 5.3 per unit, almost the same as the previous year.

The strong growth in trading volume in and revenue in Q1 FY25 is boosting IEX share price.

What Next?

The company's future is anchored on several growth drivers and strategic initiatives.

The company expects high GDP growth of about 7% to drive electricity consumption.

Industrial sectors, electric vehicles (EVs), rooftop solar installations, and data centers will significantly boost demand.

Consumer demand is also projected to grow, with energy consumption expected to increase by around 8% YoY for FY24 and 11% YoY for Q1 FY25.

The company plans to introduce new products like long-duration contracts and green real-time markets (RTM).

Approval from the Central Electricity Regulatory Commission (CERC) is awaited for an 11-month contract and green RTM.

The company sees potential in shifting demand from costlier power sources to cheaper, surplus power available during the daytime.

The company aims to increase the share of renewable energy through market-based models. Initiatives include Contracts for Difference (CfD), virtual power purchase agreements (PPAs), and peer-to-peer (P2P) trading models.

The Indian Gas Exchange (IGX), incorporated by the company in 2020, has also shown promising growth.

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 3%. In the past six months, it is up 37%.

In 2024 so far the stock has rallied 17.5%, additionally, in the past year it is up by 53%.

The stock touched its 52-week high of Rs 200.5 on 8 August 2024 and a 52-week low of Rs 121.3 on 26 October 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.

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