Indian Energy Exchange Ltd IPO Details and Review

October 8, 2017

About Indian Energy Exchange
Business Operations of Indian Energy Exchange Ltd
• Day Ahead Market
• Term Ahead Market
• Renewable Energy Certificates
• Energy Saving Certificates (EsCerts)
Key Strengths of Indian Energy Exchange Ltd
Promoters of Indian Energy Exchange Ltd
Financial Highlights or Financial Performance
Indian Energy Exchange Ltd (IEX) IPO Details
Objective of IPO
Risks for investors for IEX IPO

About Indian Energy Exchange

The Indian Energy Exchange (IEX) operating since June 27, 2008 belongs to electric utility industry with headquarters at New Delhi, India. It is an electronic system based power trading exchange that is regulated by the Central Electricity Regulatory Commission (CERC). IEX is a company that was deeply involved for the development of power trading in India. IEX also provides an electronic platform to several companies of power market that includes state electricity boards, power producers, power traders and open access consumers that include both industrial and commercial.

With an influential market shares, IEX owns 3,800 registered clients, over 300 private generators and over 3,300 industrial electricity consumers.

Click Here to view support and resistance level of Indian Energy Exchange.

Click here to view End of the day chart for indian energy exchange.

Business Operations of Indian Energy Exchange Ltd

IEX is popularly known as a neutral platform for companies from different industry sectors participate in bidding for range of products and services as per their needs. To participate in bidding for products and services, companies need to avail the membership. IEX has classified their products in following categories –

Day Ahead Market – In this, companies or the participants of bidding transact electricity on 15 minutes time block basis, 24 hours of next the day before the actual delivery of electricity. During the market bid session, both the buyers and sellers have to anonymously submit their bids. Matching of bids is carried on based on double sided auction mechanism with uniform clearing price.

Term Ahead Market – In this, participants gets to buy/sell electricity on a term basis for duration of up to 11 days ahead. Under this, participants can buy electricity on same day through intra-day contracts, for next day through day-ahead contingency, for daily basis for seven days through daily contracts and for weekly through weekly contacts. TAM also assures a firm delivery of electricity for a few days in advance.

Under TAM, Risk management is done through collection of margins mentioned under Bye-Laws, Rules and Business Rules of the exchange.

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Renewable Energy Certificates –REC mechanism was introduced by Central Electricity Regulatory Commission for transaction of renewable energy by the state utilities and obligated entities along with states that are not well endowed with Renewable Energy sources. Here one REC (Renewable Energy Certificate) is equivalent to 1 MWh of energy that is generated from renewRenewable Energyable sources.

Energy Saving Certificates (EsCerts) –Under this, NMEEE (National Mission on Enhanced Energy Efficiency) initiated PAT (Perform, Achieve and Trade) mechanism to enhance and incentivize energy efficiency specifically in large energy intensive industries. It has 478 Direct Consumers (DCs) from 8 energy intensive sectors as shown below.

Source – Renewable Energy Certificates
 

Salient Features of ESCerts Trading 
ComplianceMandatory
Target EntitiesDesignated Consumers
BuyersIndustries not achieving target
SellersIndustries achieving beyond target
Target6.6 million toe for 1st Cycle
MechanismCap and Trade
Phase Cycle3 Years
ESCerts1 ESCert = 1 MTOE (Metric Tonne of Oil Equivalent)
Trading PlatformPower Exchange Only
PenaltyAs per energy Conservation Act, 2001
BankingAllowed for two consecutive cycles
Compliance Period3 Years for DCs

Key Strengths of Indian Energy Exchange Ltd

• IEX is India’s largest exchange for trade of various electricity based products in terms of traded contract volume in year FY2017 as per the reports from CERC.
• IEX drives benefits from conducive Government policies and regulations for increase in energy trading with increase in the volume of electricity products that can be traded over exchanges.
• IEX promotes price discovery through its bidding process and allows flexibility of trade in various electricity products.
• IEX has significantly diversified base of participants that ensures prominent liquidity on trade and exchange.
• IEX technology infrastructure is also highly scalable and proven with respect to industry standards.
• IEX is a well-managed organization with highly qualifies and experienced strong team at management level.

Promoters of Indian Energy Exchange Ltd

IEX was promoted by FTIL (Financial Technologies) and PFS (PTC Financial Services). These two companies hold no equity shares in the company post divestment.
As of January 4, 2008 – Allotment of shares passed by board is –
FTIL (1,09,50,000 equity shares)
• PFS (65,00,000 shares)
Rural Electrification Corporation (12,50,000 shares)
• Reliance Energy (12,50,000 shares)
Adani Enterprises (3,00,000 shares)
• IDFC (12,50,000 shares)
• LancoInfratech (12,50,000 shares)
Tata Power Company (12, 50,000 shares).

Later in 2008, board has allotted 9, 50,000 shares to Adani Enterprises along with 4, 39,190 Preferential shares to PFS and 12, 50,000 preferential shares to Jindal Power.

Indian Energy Exchange Ltd (IEX) IPO Details

Objective of IPO –The objective of IEX IPO is to gain the benefits of listing the equity shares on stock exchanges and to carry out the sale of up to 6,065,009 equity shares. The company shall not revive any proceeds of the offer.

Issue Open Dates9th October, 2017 (Wednesday) – 11th October, 2017 (Friday)
Face ValueRs 10 per Equity Share
Issue PriceRs 1645 – Rs 1650 per Equity share
Market Lot Size9 Shares
1 Lot Investment RangeRs. 14,805 – Rs. 14,850
Listing atNSE & BSE
Type of the IssueBook Built Issue IPO
Size of Issue6,065,009 Equity Shares of Rs 10 aggregating up to Rs 1,000.73 Cr
• Offer for Sale of 6,065,009 Equity Shares of Rs 10.
Key Business Segments for RevenueUtility Electricity Trade Exchange for intensive energy consumption industries as well as domestic supply.
Promoter of IEXFTIL (Financial Technologies) and PFS (PTC Financial Services)

Risks for investors in IEX IPO

Following are some the risks stated by the brokerage houses –
• IEX is highly depending on government regulations. Any unpredictable or unforeseen changes in these regulations and implementation of the same shall impact the normal business operations of IEX.
• Shortage on power supply or insufficient system capacity would impact the volume being traded on exchange.
• IEX Operations is highly dependent of maintaining and increasing the number of participants.
• IEX business expansion to new markets also bring risks due to regional unfamiliarity
• Any minor disruption in IT System may affect IEX’s business operation.

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