Indian Energy Exchange tumbles 23% in two sessions, hits 52-week low. Here is why?

Shares of the Indian Energy Exchange (IEX) crashed as much as 23 per cent in the last two trading sessions to hit a 52-week low of Rs 116 on the BSE after Power Ministry called upon Central Electricity Regulatory Commission (CERC) for implementing market coupling process to ensure uniformity in prices.

Trading volume in IEX shares spiked during the session as 82.24 lakh shares changed hands on the BSE compared with an average of 6.51 lakh shares traded daily in the past two weeks, data from BSE showed. On the National Stock Exchange, over 10 crore shares were traded by noon trading.

Due to the market coupling process, IEX would lose its competitive edge of being one of the most trusted power trading platform for electricity spot price determination as the prices would be determined by a single government entity. This would enable Hindustan Power Exchange (HPE) and Power Exchange India (PXI) to capture IEX's market share and disrupt its monopoly.

The Power Ministry had directed the power sector regulator CERC to initiate implementation of market coupling process in a timely manner.

Market coupling is the process of collecting buy and sell orders from all the operating power exchanges and matching them to find a uniform market clearing price.

It ensures price uniformity in power trading, where a single entity owned by the government is responsible for price discovery which happens with power getting dispatched to short-term power trading platforms. 

IEX, which has a monopoly in the power exchange sector, is an electronic system-based power trading platform regulated by the CERC. It faces competition from HPE and PXI. 

Analysts at Nuvama Institutional Equities have given a "reduce" rating on the stock and said that there are near-term headwinds for IEX.

"We factor in a volume CAGR of 16% over FY24 and notably there are near-term headwinds from i) implementation of market coupling, ii) high power price-driven shift in power volumes away from the spot market to longer-duration instruments; and iii) rising competition", said the brokerage firm. 

As of 12:22 pm, IEX shares traded 9.85 per cent lower at Rs 123.05, massively underperforming the Sensex which was trading on a flat note.