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Indian Energy Exchange reports inline performance in Q1FY23

ICICIdirect Research 27 Jul 2022 DISCLAIMER

What's Buzzing: 

IEX reported subdued quarterly numbers due to unfavourable macros. Mainly due to due to CERC imposing a capping of | 12 on all the segments of power exchanges.

Context: 

In Q1FY23, IEX's revenue came in at Rs 98.4 crore, up 8% YoY and down 12.2% QoQ(vs IDirect estimate of Rs 98.5 crore). IEX registered an EBIDTA margin of 82.4% vs 84.7% QoQ and 82.2% YoY.  Absolute EBIDTA came in at Rs 81 crore, vs. Rs 94.9 crore in last quarter (IDirect estimate of Rs 80.8 crore). Employee cost declined 15.9% YoY and 30.4% QoQ to Rs 8.1 crore. Other expenses were increased by 65.4% QoQ to Rs 9.3 crore. Tracking it's operating performance, IEX ended the quarter with a PAT of Rs 69.1 crore vs (IDirect estimate of Rs 70.2 crore) vs. Rs 62.1 crore in Q1FY22 and Rs 88.4 crore in Q4FY23.

Perspective:

Although the IEX numbers were in line with our estimates the macro conditions are not favouring the power exchange platform. Some of the main challenges that IEX is facing are: CERC imposing a capping of Rs 12 on all the segments of power exchanges, Launch of new power exchange platform (Hindustan Power Exchange), Shortage of Coal and elevated coal and LNG prices, imported coal based power plant unable to sustain high imported coal prices thus they have to shut their operations. Reduced volumes in this quarter is mainly due to bilateral agreement between the buyer and seller due to price capping on per unit electricity by CERC. Although IEX successfully launched the much-awaited Longer Duration Contracts up to 90 days on the Exchange which will help to bolster its presence in the short-term market and it is also focusing on new product launches like as Ancillary Markets, Capacity Markets, Gross Bidding Contracts and Electricity derivatives but it remains to be seen how IEX cope up with challenges mainly with Hindustan Power exchange who currently is offering power exchange at discounted prices in the name of promotional offers.

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