Alpha | Indian Energy Exchange Ltd . – Equity Research Desk

Indian Energy Exchange Ltd – Transforming power markets

Established in 2008 and headquartered in New Delhi, Indian Energy Exchange Ltd (IEX), is India’s leading electronic trading platform for the physical delivery of electricity, renewables, and certificates enabling the participants to buy or sell energy through double-sided closed auction process.  Operating under the regulations of Central Electricity Regulatory Commission (CERC) the platform facilitates the matching of bids and offers from buyers and sellers, enabling them to transact based on market-based pricing. IEXs primary source of revenue is the transaction fee charged from participants for utilising its trading platform with other income sources being membership fee and annual subscription fee, fee from selling market data and other value added and ancillary services. As of Q4FY25, the company has a robust ecosystem of 8,500+ registered participants, 5,700+ commercial and industry players and 2,500+ RE generators and obligated entities.

Products and Services

The products and services offered by the company can be categorised under the following market segments:

• Electricity market
  • Day Ahead Market (DAM) – Physical delivery of power within 24 hours of bidding.
  • Term Ahead Market (TAM) – The participants can buy/sell electricity on a term basis.
  • Real Time Market (RTM) – Physical delivery of power within an hour of bidding process.
  • Cross Border Electricity Trade (CBET) – CBET with South Asian countries in DAM and RTM trading.
• Green Market – Products such as Green DAM, Green TAM that facilitate trading of renewable energy such as solar, wind etc.
• Certificate Market – Represents 1 MWh of energy saved from a project/electricity generated from a renewable energy resource.

Subsidiaries – As of FY24, the company has one subsidiary and one associate company.

Investment Rationale

• Focused Growth Plans – The company is expanding its reach in the green energy space through its subsidiary, International Carbon Exchange (ICX). In September 2024, ICX became India’s first accredited issuer of International Renewable Energy Certificates (I-RECs), which are globally recognized proof that 1 megawatt-hour of electricity has been generated from renewable sources like solar or wind. In just 7 months, ICX has issued 59 lakh (5.9 million) I-RECs – a strong start in this fast-growing market. IEX is also working on launching India’s first coal trading exchange, showing its intent to grow and diversify. The Indian Gas Exchange (IGX), promoted by IEX, achieved its highest-ever annual trading volume of 60 million MMBtu in FY25 – a 47% jump over the previous year. This shows strong growth in India’s gas market and underlines IGX’s rising importance as an energy trading platform.

• Strong business performance – RTM grew 29% this quarter to 9.7 billion units (BU), showing increasing demand for short-term power trading. The Green Market doubled its volume to 1.9 BU. This growth supports India’s clean energy goals by helping power companies meet their renewable energy obligations. IEX is also waiting for regulatory approval to extend the Term Ahead Market trading window from 90 days to 11 months — a move that could attract more participants. The hearing for another petition related to the Green RTM segment is complete, and public feedback has been submitted to the regulator.

• Q4FY25 – The company generated total revenue of Rs.175 crore, a 17% growth from Rs.149 crore of Q4FY24. Operating profit was at Rs.158 crore compared to the Rs.135 crore of the previous year, a growth of 17%. Net profit improved by 21% YoY from Rs.97 crore to Rs.117 crore. The company traded 31.7 BU of electricity volume during the quarter, a growth of 18% YoY.

• FY25 – During the FY, IEX generated revenue of Rs.657 crore, an increase of 19% compared to the FY24 revenue. Operating profit is at Rs.588 crore, up by 20% YoY. The company reported net profit of Rs.429 crore, an increase of 22% YoY. The company traded 121 BU of electricity in FY25, a growth of 19% compared to FY24.
• Financial Performance – The revenue and net profit CAGR of the company for the past 3 years is around 8% and 12% between FY23-FY25. The 3-year average ROE and ROCE for the company is around 39% and 51% for the past 3 years. The company has a robust capital structure with a debt-to-equity ratio of 0.01.

Industry

The power sector in India plays a vital role in supporting economic growth and development. Over the past decade, government initiatives such as the creation of a unified national grid, expanded distribution infrastructure, and near-universal household electrification have helped shift the country from a power-deficit to a power-surplus status. Power generation reached approximately 1,378.42 BU in FY25 (up to December 2024), reflecting strong demand growth. The sector is undergoing a significant transformation, driven by rising electricity consumption, a transition toward renewable energy, and ongoing policy reforms aimed at increasing market efficiency. With a growing focus on sustainability and infrastructure investment, India’s power industry is well-positioned for long-term growth.

Growth Drivers

• Government plans to invest Rs. 9,12,000 crore (US$ 107.89 billion) in power transmission infrastructure by 2032 to boost capacity and support growing electricity demand.
• In the Union Budget 2025-26, the government boosted its flagship rooftop solar initiative, PM Surya Ghar: Muft Bijli Yojana, by allocating Rs. 20,000 crore (US$ 2.33 billion) an 80% increase to fast-track the deployment of rooftop solar projects.
• 100% FDI allowed in the power sector has boosted FDI inflow in this sector.

Peer Analysis

IEX is a moat in its business segment and there is no listed competitor with a similar range of operations. Here we are comparing it with Multi Commodity Exchange of India Ltd. IEX is undervalued generating robust returns from the invested capital.

Outlook

IEX is well-positioned to benefit from India’s growing energy demand and the ongoing shift toward renewable and market-based electricity trading. The company is maintaining an electricity volume growth of 2.5 to 3x times to the electricity demand in the country. With strong growth in real-time and green power segments, new initiatives like the carbon exchange, and rising volumes on its gas platform, the company is expanding beyond its core business. Supported by a high-margin, asset-light model and potential regulatory tailwinds, IEX offers a compelling long-term growth story for investors seeking exposure to India’s energy transformation.

Valuation

Given the sustained strong demand for electricity and the expected expansion of electricity exchanges due to enhanced price discovery, IEX, as the market leader, is ideally positioned to take advantage of these favorable conditions. We recommend a BUY rating in the stock with the target price (TP) of Rs.226, 42x FY27E EPS.

SWOT Analysis

Recap of our previous recommendations (As on 27 June 2025)

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