Listing possibility, bright business prospects prompted TVS to buy stake in IEX

TVS Capital has bought the stake from Bessemer Venture Partners

TVS Capital, a private equity major, has taken a 3.1 per cent stake for Rs 72 crore in Indian Energy Exchange (IEX). It is a high price, prompted by prospects of the exchange’s volumes and trading interest surging further and the possibility of it listing in the future. The stake was bought from Bessemer Venture Partners, valuing the company at Rs 2,500 crore.

Bessemer purchased the stake in 2010, when the exchange was valued at Rs 350 crore. IEX was launched in 2008. The turnover was Rs 152 crore in 2013-14 and Rs 150 crore in 2014-15. It has about 90 per cent of the day-ahead market in power trading. The original co-promoter was Power Trading Corporation of India, whose presence brought others to the exchange.

Gopal Srinivasan, chairman and managing director of TVS Capital, said they’d been attracted by the fact that as generation and transmission capacity expands, the open access system would encourage all consumers to buy some part of their needs on a daily or weekly basis. In Europe, about 65 per cent of the power is traded versus three to four per cent in India.

“We expect trading to grow five to seven per cent (annually) over the next five to seven years, conservatively. And, to over 10 per cent of total electricity traded if the (present government’s) pro-development policies are implemented expeditiously,” said Srinivasan.

Also, with about 90 per cent of short-term power traded here, all the sellers and buyers are already present, in what tends to be a winner-takes-all business. Financial Technolo-gies recently sold its software for running the exchange to IEX. On Friday, the Supreme Court allowed it to complete the sale of its shares to a suitable buyer. Once that exit happens, the company expects to surge ahead, as the FTIL share sale issue took quite a bit of management attention and investor concern.

On whether TVS Capital would take a board seat in IEX, he said this could be commented on only when the FTIl sale transaction was complete. In larger companies like these, investors' main role is to ensure the best possible management teams are motivated and empowered to grow the business sustainably and profitably, he said. “We think the company can be listed at an appropriate point when the firm, the markets and the regulators are all aligned,” said Srinivasan, adding that at some time in the future, the fund might consider increasing stake “to a small extent. We will wait and watch”.

IEX is approved and regulated by the Central Electrcity Regulatory Commission. The number of registered participants are around 4,000 across utilities from 29 states and five Union Territories, 1,000-plus private generators and 3,000 open-access consumers.