'Market coupling' poses threat to IEX, says Nuvama; assigns 'Reduce' tag

Brokerage firm Nuvama Institutional Equities has assigned a ‘Reduce’ rating on Indian Energy Exchange (IEX), citing market coupling as a key structural risk to the company’s growth in FY27–28, despite IEX reporting a 13.9 per cent Year-on-Year (Y-o-Y) growth in net profit to ₹123.3 crore in Q2FY26, up from ₹108.3 crore in the same period last year.

 

During Q2FY26, the company's revenue from operations grew 10.5 per cent Y-o-Y to ₹153.9 crore, while earnings before interest, taxes, depreciation, and amortisation (Ebitda) expanded 11.4 per cent Y-o-Y. Overall volumes rose 8 per cent Y-o-Y, with Renewable Energy Certificates (REC) declining 30 per cent Y-o-Y, offset by Real-Time Market (RTM) volumes, which jumped 39 per cent Y-o-Y, even as power demand remained muted at +3.1 per cent in Q2FY26.

 

Following the results, Nuvama analysts assigned a target price of ₹131 per share, nearly 5.8 per cent lower than IEX stock’s previous close on the BSE on October 31. Analysts noted that while IEX benefits from RTM growth amid subdued power demand, long-term risks of power deficits could push up spot prices, potentially lowering spot volumes.

Market coupling is a key threat to FY27–28 growth

Nuvama also introduced FY28E estimates and deferred the Domestic/Term Ahead Market (DAM/TAM) share loss to FY28E/29E. Analysts view market coupling as a key threat to FY27–28 growth, while potential benefits from MBED (if implemented) offer limited upside, despite factoring in a rise in exchange-traded volumes from 8 per cent of generation in FY25 to 19 per cent by FY33E.

 

“IEX’s 17-year dominance in the power exchange market faces a structural threat with the impending implementation of market coupling. The next hearing of APTEL regarding IEX’s challenge against CERC’s coupling order has been deferred to 28th November 2025, after which greater clarity is expected,” the analysts wrote in a research note.

  That said, the analyts also highlighted that the management remains optimistic that a ‘price war’ may not necessarily materialise in DAM/RTM. The company is also awaiting approvals for extended TAM contracts, Green RTM, and peak DAM/RTM variants to broaden its product offerings. Management expects strong growth in IGX and ICX markets, with regulatory exploration for India’s first coal exchange underway.

Crucial period ahead

Analysts said the next 18–24 months will be crucial, with CERC’s review of DAM coupling from Jan-26 onwards seen as a key variable. If extended to RTM and TAM, IEX’s market share could face further erosion. Successful implementation will depend on complex backend technology, in which IEX claims a competitive edge over rivals.