India’s power industry is a lot like the philosophical experiment Ship of Theseus: the more its parts change, the more it remains the same.
Over the years, payment woes, transmission losses, and crumbling finances of power distribution companies, or discoms, have plagued the sector, leading to a gaping US$80 billion hole hole Live Mint There's an $80 billion hole in India's climate pledge Read more in India’s energy system.
Sweeping changes might be on their way, though, in the form of the Electricity Amendment Act Electricity Amendment Act Ministry of Power Draft Electricity Amendment Act Read more and the draft New Energy Policy New Energy Policy Press Information Bureau Draft New Energy Policy Read more . India’s power ministry is looking to delicense the distribution business to bring down entry barriers, and make energy more accessible and sustainable.
It also has a rather grandiose goal to boost the share of exchange trading in India’s total power supply from 7.5% currently to 25% by 2023. “Even if this is a bit ambitious, the share will surely reach around 14% at least—double of what it is today,” says a senior analyst at a Bengaluru-based portfolio management firm.
Whenever this happens, one company is poised to benefit: the Indian Energy Exchange (IEX). Set up in June 2008, it was listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in 2017. Today, it has established a near-monopoly in India’s power exchange market, with its only rival, the Power Exchange of India, failing to give it tough competition.
IEX is to power trading what NSE is to stock trading: a marketplace where independent power producers (IPPs), corporations, discoms, and utility companies come together to buy and sell power.
Even before the new policies come into effect, IEX already has a strong momentum going. In the past year, its stock has rallied over 50%, compared to a mere 5% rise in the S&P BSE 500 index. Today, its market cap stands at Rs 16,382 crore (US$2.1 billion). And in the year ended March 2021, IEX achieved an all-time high volume of 102 billion units (BU), a growth of 37% on a year-on-year basis. Its net profit increased by nearly 50%, while margins improved by about 12%, during this period.