IEX scales new high in a weak market, rallies 22% in seven days

In the past three months, the stock of IEX has outperformed the market by surging 65 per cent as against a 4.3 per cent rise in the S&P BSE Sensex

Shares of Indian Energy Exchange (IEX) rose 3 per cent to hit a new high of Rs 366.40 on the BSE in intra-day trade on Friday in an otherwise weak market. The stock of electric utility company was trading higher for the seventh straight day, up 22 per cent during the period, after the company entered into a strategic partnership with the National Stock Exchange (NSE) and Oil and Natural Gas Corporation (ONGC) to build gas markets.

IEX on March 10 announced strategic divestment of 26 per cent of its equity holding in the Indian Gas Exchange (IGX) to the NSE and additional 5 per cent equity holding to ONGC.

IGX is a subsidiary of IEX - India’s premier nationwide, automated electricity trading platform. IGX is India's first gas exchange after it secured authorisation from the Petroleum and Natural Gas Regulatory Board (PNGRB) on December 2 last year. IGX, working in collaboration with strong leaders from both the public as well as the private sector, has a pioneering role in developing a vibrant gas market in the country.

In the past three months, the scrip has outperformed the market by surging 65 per cent as against a 4.3 per cent rise in the S&P BSE Sensex.

IEX, the premier electricity exchange of India is a proxy play for India’s short-term power market which is still at a nascent stage (10 per cent of the total market), albeit with enormous potential. New product launches such as RTM (Real-Time Markets) will enable discoms to manage their power demand-supply variation more effectively while also providing generators to sell their unrequisitioned capacity.

Going ahead, analysts at ICICI Securities expect the share of IEX in the short-term market to increase further with a decline in bilateral transactions. "We believe, IEX’s virtual monopoly in the segment, India’s overcapacity in power and lower short term market rates are some of the key catalysts that would usher higher volumes on the exchange. Furthermore, the Indian Gas Exchange which is currently a seed in the pot also provides an embedded option value," the brokerage said in a stock update.

Debt-free balance sheet, ample cash reserves, a huge opportunity pie, necessary technology and new product launches to gain market share also make IEX an attractive play for the theme of shifting to short-term power market, analysts added. They have a ‘buy' rating on the stock with a target price of Rs 430 per share.