IEX expects double-digit volume growth in FY26, driven by strong liquidity

Business Standard

04-05-2025

Indian Energy Exchange, the country's leading electricity exchange, is expected to log a double-digit volume growth in the current financial year that started in April, on the back of increasing sell side liquidity and launch of new products, according to analyst reports post IEX's FY25 earnings.
The current financial year is likely to see a capacity addition of 11 GW on thermal side and up to 40 GW on renewable side that is expected to keep supply-side liquidity on exchanges strong, thereby driving down price discovery in key trading segments like Day Ahead Market and Real Time Market (RTM).
According to analysts, introduction of new products like green RTM and long-duration contracts (LDC) of up to 11 months will further add to volumes on IEX. In 2024-25, IEX logged the highest-ever traded electricity volume of 121 billion units (BUs), up 18.7 per cent year on year.
"Approval for 11-month LDC contracts, green RTM, private participation in selling un-requisitioned surplus on exchanges, declining BESS prices, boost for FDRE/RTC green projects are all likely to boost supply-side liquidity/volume growth outlook," AXIS Capital said in its post earnings note.
"As BESS becomes increasingly competitive, it will support growth of FDRE solutions and thereby improve liquidity on exchanges," the note said.
According to analysts, IEX has submitted a petition to regulator CERC for an 11-month LDC contract. It shall help shift part of DEEP volume (40 BU in FY24) to exchanges. Price discovery in LDC is expected to be around 25 per cent lower than on DEEP platform for a similar duration. Also, margin requirements for customers will mean that IEX does not run any working capital risk in LDC contracts. The approval is awaited.
The long duration contract is aimed at offering greater flexibility for market participants, particularly distribution companies, by enabling longer-term contracts for more stable power procurement.
"If approved in the next two to three months, IEX expects an additional annual potential of 40 BU (billion units). Additionally, the Green RTM (new product) would allow resellers to earn a price premium over conventional power, while enabling buyers to fulfil their renewable purchase obligations by sourcing green electricity," Antique Stock Broking said in a report.
"It (launch of LDC) shall help to shift part of DEEP volume to exchanges. Price discovery in LDC is expected to be ~25 per cent lower than on DEEP platform for a similar duration. Also, margin requirements for customers will mean that IEX does not run any working capital risk in LDC contracts," AXIS said in its note.
Beyond electricity trading, IEX is witnessing traction in other commodity exchanges such as gas with nearly 50 per cent growth in volumes, carbon exchange that commenced operations in FY25 and coal exchange where a consultation paper has been floated.
According to Antique, IGX volume increase is mainly due to Reliance Industries and ONGC selling a good part of their production in the market now.
"IGX achieved a record 60 million MMBtu in traded gas volume in FY25, up 47 per cent YoY. With falling gas prices, IGX expects continued volume growth," said the Antique note.
"Diversification into carbon exchange and coal exchanges in the future and improvement in volume growth outlook for IGX add growth options over the medium term," AXIS said.
IEX is working with the coal ministry to set up India's first Coal Exchange by FY27. The launch is expected to require amending Mines and Minerals Development Regulations Act to facilitate sale of surplus coal through coal exchange, including from commercial and captive mines.
Talking about market coupling, the analysts have said that there is no clarity on the issue as yet. "Inordinate delays by the government/regulator imply challenges/ limited merit in implementing the same," IIFL Capital said in its post-earnings note.
During the 2024-25 fiscal, IEX reported a consolidated net profit of Rs 429.16 crore compared to Rs 350.78 crore a year ago while total income rose to Rs 657.36 crore from Rs 550.84 crore in 2023-24.