One of the most critical components of infrastructure crucial for economic growth is power as the existence and development of adequate infrastructure is essential for sustained growth of any economy. India’s power sector is one of the most diversified with sources of power generation ranging from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste.
The power sector was truly transformed in 2008 on the setting up of the Indian Energy Exchange in the country,
providing benchmark prices for all electricity transactions, clean transparent mechanism for real price discovery and high liquidity ensuring lowest cost and assured supply. The Indian Energy Exchange Limited (IEX) is the first and largest energy exchange in the country providing a nationwide, automated trading platform for physical delivery of electricity and issuing Renewable and Energy Saving Certificates. IEX is approved and regulated by the Central Electricity Regulatory Commission. The exchange platform enables efficient price discovery and increases the accessibility and transparency of the power market in the country while also enhancing the speed and efficiency of trade execution. Participants such as distribution companies, corporates, electricity generators and open access consumers are registered on the exchange being eligible to trade electricity contracts and RECs. The open access consumers belong to various industries such as metal, food processing, textile, cement, ceramic, chemicals, automobiles, information technology, housing and real estate.
One of the popular product segments of IEX is the Day-Ahead Market (DAM) segment where participants transact electricity on a 15-minute block basis, a day prior to the delivery of electricity. Both the buyers and sellers submit their anonymous bids electronically during the market bid session and matching of bids is done with uniform market clearing price. The Term-Ahead Market (TAM) contracts cover a range for buying and selling electricity for duration up to 11 days. On the other hand, the Renewable Energy Certificates market segment facilitates transaction in both solar and non-solar environment options. IEX posted decent Q1FY2021 financial numbers with net sales at Rs 66.31 crore, up 9.5% from Rs 60.55 crore for the June quarter of 2019, while net profit stood at Rs 42.88 crore, up 8.33% from Rs 39.59 crore as of June 2019 quarter. EBIDA went up by nearly 8% to Rs 63.16 crore. The IEX share can be bought by portfolio investors at the current market price of Rs 190 for medium term investment for decent price appreciation.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.